Intermediate Clearing Session Introduced on FORTS
OREANDA-NEWS. Starting from October 8, 2007 an intermediate clearing session will be introduced on the derivatives section of RTS (FORTS). Intermediate clearing, a technology widely used by the Western derivatives markets, will be available on the Russian securities market for the first time, the press-service of RTS reports.
Due to the fact that clearing on the derivatives market will take place twice a day, the exchange will be reevaluating the risks of trading participants more often and have more control over these risks. Thus, the introduction of intermediate clearing will allow a reduction in the level of initial margin on futures and options by 1.3-1.5 times.
With the introduction of an intermediate clearing session, the profit received by futures and options market participants - a variation margin - will be paid twice a day - after the evening clearing session and in the middle of the trading day. In case of severe market fluctuations during a day, market participants with profitable positions will not suffer a decrease in funds with the increase of initial margin. In fact, the settlement of client account funds in the middle of a trading day will lead to an early detection of loss-making positions and prompt margin-calls, which means the risks of brokers with clients on FORTS will be reduced.
The new service will speed up the process of settlement between the RTS Clearing Center and clearing members, increase reliability of the clearing system, reduce the risks of clearing firms in serving clients on the derivatives market and increase effectiveness of trading transactions with futures and options at the expense of reducing the volume of the funds required for trading.
Due to the reduction in the risk assessment time-span, the size of the initial margin on futures and options contracts traded on RTS will reduce as well. For example, for futures contracts on RTS Index it will become 7.5% versus present 10%. In conditions of ever-growing rates in the money market, the introduction of intermediate clearing is timely and useful for trading participants, because it will reduce the cost of maintenance of positions, says CEO of OJSC RTS Roman Goryunov. Goryunov forecasts the trading volume on the derivatives market to increase in the next six months by 30%, at least.
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