Abaxx Clearing's Stress Testing and Guaranty Fund framework is designed to assess the potential risk exposure of Clearing Members under extreme but plausible market scenarios and is used to determine the appropriate size of the Guaranty Fund.

The Risk Department performs daily stress testing analysis to monitor these exposures and continuously assess the sufficiency of total financial resources. Stress testing may be conducted more frequently when the Risk Department observes material or recurring trends in intraday exposures or portfolio composition.

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

Guaranty Fund Contributions and Waterfall

Primary parameters that will affect the Guaranty Fund size include:

• Daily end-of-day stress test results, calculated as the maximum by summation of 1) the largest Stress Test result from a Clearing Member and 2) stress test results of two (2) financially weakest Clearing Members (in accordance with the MAS Requirements)
• The Guaranty Fund size is based on the maximum daily stress test result over a 60-day lookback period, recalculated on the last business day of each month (or more frequently if market conditions warrant). This determines the required fund size for the following month.

 

Each Clearing Member's monthly contribution is calculated as a function of their individual open positions.

In addition to Clearing Member contributions, Abaxx Clearing contributes an amount equal to at least 25% of the total Guaranty Fund size. This contribution, referred to as Skin-in-the-Game (SITG), is earmarked to be used ahead of non-defaulting Clearing Member contributions.

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Guarantee Fund (GF) Resources ("Default Waterfall") during a Clearing Member (CM) default
Order in which collateral is used to liquidate defaulting Member's portfolio: