Abaxx Clearing's margin framework captures potential price movements over a predetermined close-out period to inform the amount of Initial Margin collected from each Clearing Member. The Risk Department routinely assesses portfolio risk exposure and margin sufficiency throughout the day, marking positions to market and collecting both Initial Margin and Variation Margin as needed.

Margin coverage is assessed daily through volatility analysis using a Filtered Historical Simulation (FHS) model based on Exponentially Weighted Moving Average (EWMA) volatility analysis. The resulting scanning ranges are applied in the SPAN margin calculator to determine portfolio-level margin requirements.

Margin Model & Methodology

Margin requirements of a Clearing Member function as safeguards to mitigate the risk of a Clearing Member defaulting on any financial responsibility tied to their open positions.

Margin models used by Abaxx Clearing are reviewed and subject to independent assessment and validation of the primary components. Parameters used within the models are reviewed and set by the Abaxx Clearing Risk Department in accordance with policies and procedures approved by all the appropriate Risk Committees.

On an annual basis, the Risk Department leads a comprehensive review of the margin framework, including an independent assessment and validation of the primary components.

Abaxx's margin model methodology follows industry best practices and is based on a Filtered Historical Simulation (FHS) / Value-at-Risk (VaR) model.

 

 

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Member Initial Margin

The Initial Margin is a returnable deposit based on a Clearing Member's open positions. It is calibrated to be sufficient to cover the expected cost of closing out a defaulting Clearing Member's position in normal market conditions to a 99% confidence interval based on the above Margin Model methodology.

Clearing Members may be required to provide additional margins to cover concentration risk, illiquid positions, credit risk or wrong-way risk. Changes to Abaxx Clearing margin parameters are notified via email to market participants as Circulars. The Initial Margin is calculated as follows:

 

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Additional Risk-Based Margin

At the discretion of the clearinghouse, risk-based additional margin may also be assessed for:

• Large exposures
• Position concentration
• Counterparty credit risk
• Contracts nearing delivery

Margin Call

Abaxx Clearing will mark positions to market at least twice a day and collect variation margin (VM), initial margin (IM) and risk-based additional margin (AM) from each clearing member.