OREANDA-NEWS. May 18, 2011. The MICEX Group launched a new risk management system in its foreign exchange market. The new system will reduce the costs of participation in trading by using single collateral, a single limit and a flexible system of risk assessment. It will also help to expand the range of instruments traded in the foreign exchange market and create preconditions for further development of clearing in all markets of the MICEX Group.

The launch of the new risk management system will enable market participants to make trades in any of the major currency pairs (USD/RUB, EUR/RUB, EUR/USD) using one of three currencies, U.S. dollars, Euros, Russian rubles, or any combination of these currencies as collateral (single collateral). Prior to the launch of the new system there was separate collateral for currency pairs and instruments.

Participants will also be able to use the limit covered by the funds of the Risk Coverage Fund (similar to the limit of net operations) to conduct operations in currency pairs USD/RUB, EUR/RUB and EUR/USD for banks-participants in the Risk Coverage Fund. The MICEX has also optimized participants’ payment following settlement of the results of clearing of one final net obligation or final net claim in each currency.

The new system involves the introduction of adaptive rates of collateral that change depending on market conditions and help to reduce the initial margin requirements while maintaining a high level of reliability of the MICEX foreign exchange market.

For the convenience of Moscow and regional participants in the MICEX foreign exchange market, the MICEX has synchronize the time of the end of trading in currency pairs USD/RUB, EUR/RUB and EUR/USD and the time of execution of obligations for the results of clearing in the UTS.

As a result of trading, clearing participants are sent a single exchange certificate for all trades made with partial and full collateral, which contains information about final net liabilities and/or final net claims in each currency calculated on the basis of clearing of trades in currency pairs USD/RUB, EUR/RUB and EUR/USD as well as trades in “soft” currencies.

The launch of the new risk management system has led to significant changes in the Rules of Purchase and Sale of Foreign Currency in the UTS (http://www.micex.ru/articles/file/8978/pravila_ETC_20110425.doc) and the Rules of Clearing in the MICEX Foreign Exchange Market (http://www.nkcbank.ru/viewCatalog.do?menuKey=18).

The new versions of these documents are posted on the sites of the MICEX and the NCC. Find detailed information on the project “The new risk management system in the MICEX foreign exchange market” at: http://www.micex.ru/markets/currency/organization/new_system