Our risk management framework is informed and guided by international principles established by CPMI-IOSCO, the Financial Stability Board, the BCBS, as well as industry best practices.

Abaxx adheres to risk and regulatory requirements for approved clearing houses set out by the MAS in the Securities and Futures Act.

The Risk team is responsible for:

•   Performing routine risk analysis, exposure monitoring, and risk assessment
•   Determining margin and guaranty fund requirements
•   Establishing acceptable collateral and assessing liquidity requirements
•   Performing default management procedures

Our margin framework captures potential price movements over a predetermined close-out period to inform the amount of Initial Margin to collect 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.

Daily assessment of margin coverage sufficiency through volatility analysis that considers historical volatility Filtered Historical Simulation (FHS) based on EWMA volatility analysis, which determines the scanning ranges to be input into the SPAN margin calculator. The portfolio margin level will be calculated using SPAN margin 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 will lead 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 FHS / Value-at-Risk (VaR) model and is summarised as follows:

Abaxx Clearing will mark positions to market at least twice daily and collect Variation Margin (VM), Initial Margin (IM) and risk-based Additional Margin (AM) from each Clearing Member.

Should margins payable exceed the following quantitative thresholds:

• Mid-day margin calls will be triggered upon breaching the USD 50,000 threshold during the mid-day margin cycle.
• Ad-hoc margin calls will be triggered upon breaching the USD 250,000 threshold any time during the trading day.

Currently acceptable collateral from Clearing Members are US dollars for margin and Guaranty Fund requirements. Additional collateral types will be proposed within the risk advisory committee.