Margining of Deliverable Contracts Technical Specification

Transcription

1 Margining of Deliverable Contracts Technical Specification Version August 2011

2 Table of Contents 1 Introduction Background References 3 2 Margin Calculations Delivery Margin (DM) Delivery Contingent Variation Margin (CVM) Marginable Open Delivery Positions Buyer s Security Seller s Security 5 3 Data Deliverable Contracts Reference Data File (GSDC) Price and Volatility Data File (GSPV) Delivery Margins Report (MDMD) Deliveries Daily Summary (MDDS-XX-X) Standing Requirements (MBSR) 9 4 Examples Example Marginable Open Position Calculation Example Delivery Margin and Contingent Variation Margin Calculation 11 Change History Version Date Change Description August 2011 First version following Vendor consultation August 2011 Added Buyer s Top-up, Buyer s Top-up Type, Buyer s Top-up Rate, Seller s Security Lot Size, Seller s Security Type and Seller s Security Rate columns into the Deliverable contracts reference data file (GSDC) for completeness August 2011 Added Buyer s Top-up, Buyer s Top-up Type, Buyer s Top-up Rate, Seller s Security Lot Size, Seller s Security Type and Seller s Security Rate columns into the Deliverable Contracts Reference Data file (GSDC) for completeness August 2011 Added Buyer s Security and Seller s Security Sections Added ACCUMULATED_DELIVERY_SIZE column to the Deliverable Contracts Reference Data file (GSDC) Page 2

3 1 Introduction 1.1 Background The Clearing House calculates margin for physical delivery positions separately from the open contract positions. This enables the Clearing House to specify appropriate margin parameters when a contract is in delivery and to use accurate Member delivery positions. The purpose of this document is to specify how the Clearing House will calculate margins on the physically delivered contract positions. The target audience is Members and Vendors that will implement system solutions to replicate margin calculations for their customers and to reconcile the margining results. Please note that this document only covers the margin calculations. There are other mechanisms, such as Buyer s Top-up or Seller s Security, also used to manage the risk around the delivery positions but those are not changing therefore they are currently not in the scope of this document. 1.2 References For the purposes of this document, EDSP is the Final Settlement Price, i.e. the Exchange Delivery Settlement Price on the Last Trading Day; Unit is contract s price unit e.g. Therms for UK Natural Gas. Unless otherwise specified, times referred to herein shall refer to London prevailing time. Shade in the data files formats below indicate that data is not in the scope of this document, such as Buyer s Top-up and Seller s-security calculations. They are included for completeness. 2 Margin Calculations Total margin on the delivery positions comprises two components: delivery margin and delivery contingent variation margin. The Clearing House starts calculating delivery margin and delivery contingent variation margin as soon as the final position maintenance window is over and the final physical delivery positions are agreed / published. Please note that for some products, such as Natural Gas products, position maintenance window closes one day after the Last Trading Day. 2.1 Delivery Margin (DM) DM is an amount held to manage the risk of maximum price move of the physical commodity during the delivery risk period. DM is an absolute amount which will always need to be funded and it will be calculated based on either a percentage of contract value or an absolute amount per contract unit. An absolute amount (scanning range) per contract unit; DM = DM Scanning Range * Marginable Open Delivery Positions A percentage of the full contract value DM = DM Percentage * Marginable Open Delivery Positions * EDSP DM results will appear in the Member Standing Requirements Report (MBSR) as REQ_TYPE=DM, Delivery Margin, daily. DM parameters will be published on ICE Web Site, Margin Rates page at and in the new Deliverable Contracts Reference Data file available from AFTS; please see 3.1 Deliverable Contracts Reference Data File (GSDC). Members will be notified of DM parameters changes via Circular. 2.2 Delivery Contingent Variation Margin (CVM) CVM is an amount held to reflect the difference between the EDSP and the market value of the physical commodity at the end of each day. Negative CVM will be funded and positive CVM will offset other Initial Margin and DM requirements in Members settlement account. CVM is calculated as below: CVM = Marginable Open Delivery Positions * (CVM PRICE EDSP) Please note that Short positions will have a negative sign. Page 3

4 CVM results will appear in the Member Standing Requirements Report (MBSR) as REQ_TYPE=CVM, Contingent Variation Margin, daily. The prices used to calculate CVM will be published at the end of day in the prices and volatilities data file, GSPV, daily (please see 3.2 Price and Volatility Data File (GSPV)). 2.3 Marginable Open Delivery Positions Member delivery positions are held net at customer level. The first step in calculating Marginable Open Delivery Positions is to determine the customer level remaining delivery balances using the customer level net positions. Remaining delivery balances is established as below: Remaining Delivery Balance = Total Delivery Units Delivery Confirmed Units Delivery Underway Units* * Delivery Underway Units will include Buyer s Top-up for Long positions and Seller s Security for Short positions. Then the customer level remaining delivery balances will be net at the level of Clearing Member, Product and Margin Account, to derive Marginable Open Delivery Positions. Marginable Open Delivery Positions = Customer Remaining Delivery Balances Please note that Marginable Open Delivery Positions are already available in CSV format in the Member Deliveries Daily Summary reports MDDS. The Clearing House will also publish a reference data file to help Members to calculate marginable open delivery positions themselves; please see 3.1 Deliverable Contracts Reference Data File (GSDC). 2.4 Buyer s Security Buyer must provide the Clearing House with Buyer's Security as outlined in the delivery procedures. Buyer's Security is calculated by reference to the relevant Exchange Delivery Settlement Price (EDSP) plus a Buyer's Default Top-up and in general it is calculated at close of business on the second business day prior to the delivery day (D-2). The Clearing House releases the 'Buyer's Default Top-up' portion of the Buyer's Security on confirmed deliveries. The rest is released as part of the payment transaction on N business days following the delivery when Buyer pays contract value for both performed and failed delivery amounts in respect of deliveries as detailed on the Invoice and Account Sale Report. For monthly contracts Buyer s Security calculation starts on the second business day immediately preceding the first delivery day of the delivery month (M-2). The 'Buyer's Default Top-up' portion of the Buyer's Security is released on confirmed deliveries. The rest is accumulated and kept until the payment day on N business days following the month of delivery. An absolute amount (scanning range) per unit; Buyers Security = ( Delivery Size * EDSP) + (Delivery Size * Buyer s Top Up Amount) A percentage of the value Buyers Security = ( Delivery Size * EDSP) + (Delivery Size * EDSP * Buyer s Top Up Rate) The graph below illustrates progress of Buyer s Security for monthly Natural Gas and Power contracts. Page 4

5 Value Full Contract - D + n - D D D D D - Accumulated Contract Value Buyer's Top-up Buyer's Top-up Released D Delivery Day M- # of business days immediately preceding the first delivery day of the month M+ # of business days after the last delivery day of the month Accumulated Contract Value Released as part of Payment M-2 M-1 D D+1 D+2 D+n LD-2 LD+2 M+10 Timeline 2.5 Seller s Security Seller must provide the Clearing House with Seller's Security as outlined in the delivery procedures. Seller's Security is calculated using the relevant Seller s Security Rate or Amount. In general Seller s Security is calculated at close of business on D-2 and it is released two business days following the delivery date on confirmed deliveries. An absolute amount (scanning range) per unit; Sellers Security = Delivery Size * Seller s Security Amount A percentage of the value Sellers Security = Delivery Size * EDSP * Seller s Security Rate 3 Data This section defines the data files and reports available to allow Members to replicate and reconcile the margin calculation. The following table summarises the file names and locations: Description File Name Location Deliverable Contracts Reference Data File GSDC_yyyymmdd.csv /pub/reference User/Password: EUSPAN/EUSPAN Price and Volatility Data File GSPV_yyyymmdd.csv /pub/reference Delivery Margin Data File MDMD_yyyymmdd.csv Delivery Margin Report Deliveries Summary Reports Standing Requirements Report & Data File MDMD - Delivery Margins - Daily Summary - CSV MDDS-GO EL NG EM- D M_yyyymmdd.csv <clearing member mnemonic>_mbsr_yyyymmdd.csv {member_mnemonic}/deliveries/ Public Folders/ICE Clear Europe/Deliveries/{member_mnemonic} {member_mnemonic}/deliveries/ {member_mnemonic}/banking/ Please note that all reports are generated on a daily basis as part of the overnight run. Page 5

6 3.1 Deliverable Contracts Reference Data File (GSDC) GSDC is a public reference data file which includes all deliverable contract reference/price data, where applicable, required to calculate the delivery margin and contingent variation margin. The contracts will be included in the data file starting from the expiry date and they will remain there until the delivery period is over. Lot size attributes, such as DELIVERY SIZE and REMAINING LOT SIZE, are multipliers. They are mainly provided to allow Members to convert eroding contract open position in lots to delivery units for margin calculations. If a numeric data attribute is not applicable for a product it will be left blank. The data file can be accessed on the ICE AFTS in public data folders, /pub/reference, by Members and Vendors. The data file is named GSDC_yyyymmdd.csv and it will be available following completion of the ICE Delivery System EOD, around 20:00 London local time. The file format is as follows: Field Description Format BUSINESS_DATE The business date to which the contents of the file apply. For example: 26-Aug-11 COMMODITY_ID The physical commodity code, e.g. Y. CONTRACT_PERIOD The delivery month/day. This will be of the form yyyymmdd. Please note that dd portion will be 00 for monthly contracts. Date CURRENCY The currency (e.g. EUR) DELIVERY_MARGIN_TYPE DELIVERY_MARGIN_RATE P - A percentage of contract value. A - An absolute amount per unit traded. Value is quoted in the contract currency. Please note that If the delivery margin type is P the figure to be divided by 100. UNIT Deliverable contract unit (e.g. Mwh) BASE_LOT_SIZE Deliverable total contract size of 1 lot. CONTRACT_DELIVERED_LOT_SIZE PREVIOUS_DAY_CONTRACT_DELIVERED_LOT_SIZE The number of units for which delivery has been confirmed to date for the given delivery month. The number of units for which delivery has been confirmed the previous business day for the given delivery month. Page 6

7 Field Description Format DELIVERY_SIZE The number of units to be delivered on the business day + 2. This is the same as the Buyer s Security increment size i.e. the quantity in unit the Clearing House will call Buyer s Security tonight. Therefore the equivalent amount is deducted from the remaining_lot_size_long/short which is used for the delivery margin calculation. REMAINING_LOT_SIZE_LONG The number of contract remaining units - long - for which delivery has been instructed for future dates within the given delivery date. This figure will be used for the delivery margin (DM) and the contingent variation margin (CVM) calculations for the long position. REMAINING_LOT_SIZE_SHORT The number of contract remaining units - short - for which delivery has been instructed for future dates within the given delivery date. EDSP CVM_PRICE PRICE_CONVERSION_FACTOR ACCUMULATED_DELIVERY_SIZE This figure will be used for the delivery margin (DM) and the contingent variation margin (CVM) calculations for the long position. The EDSP for the contract for the contract period. The marked to market price used to calculate CVM. Factor to convert the contract trading price i.e. SPAN price to major currency unit [SPAN price * Price Conversion factor]. Total accumulated number of delivery units on the business day + 2. BUYERS_TOP-UP_LOT_SIZE Buyer's Top-Up Units. BUYERS_TOP-UP_TYPE BUYERS_TOP-UP_RATE P - A percentage of contract value. A - An absolute amount per unit traded. Value is quoted in the contract currency. Please note that If the delivery margin type is P the figure to be divided by 100. SELLERS_SECURITY_LOT_SIZE Seller s Security Units Page 7

8 Field Description Format SELLERS_SECURITY_TYPE SELLERS_SECURITY_RATE P - A percentage of contract value. A - An absolute amount per unit traded. Value is quoted in the contract currency. Please note that If the delivery margin type is P the figure to be divided by Price and Volatility Data File (GSPV) GSPV is a public data file which can be accessed on the ICE AFTS in public data folders, /pub/reference, by Members and Vendors. The report is named GSPV_yyyymmdd.csv. The important attributes are highlighted below. For complete data file specification please see for ICEU Energy Member Report Specifications. Field Description Format BUSINESS_DATE The business date to which the contents of the file apply Date COMMODITY_CODE The physical commodity code EXCHANGE_CODE SECURITY_TYPE OPTION_TYPE The name of exchange or market on which the Commodity is traded. Valid values are IOTC, IFEU and IMEN. The security or product type. Valid values are FUT (Future) and OOF (Option on Future). The deliverable contracts will appear under SECUTIRY_TYPE = FUT (Previously DLV ). For options, the identifier as to whether the option is a call or a put. Valid values are C and P. For other security types, this value will be null. CONTRACT_PERIOD The expiry date or month for the contract STRIKE_PRICE DISPLAY_STRIKE_PRICE PRICE_TYPE PRICE VOLATILITY VOLATILITY_FACTOR For options, the price at which the option would be exercised. For other security types, this value will be null. For options, the strike price formatted as a label for the strike. This is calculated as the strike price in currency units multiplied by the strike price denominator. For other security types, this value will be null. The type of price. Valid values include EOD_SETTLEMENT. The CVM price for deliverable contracts will appear in the GSPV data file until removed from the delivery system. The price quoted in currency units, e.g. GBP pence. For options, the option volatility. For other security types, this value will be null. For options, the factor by which the volatility should be multiplied to express the volatility as a decimal value. For other security types, this value will be null. Decimal Integer 3.3 Delivery Margins Report (MDMD) The Deliveries Margin Data report is a daily reconciliation report that provides Members with the deliveries margin results on a given day. The report will be available as comma delimited data files on ICE AFTS and as report ICE Reporting site. Page 8

9 The data files will be named <clearing member mnemonic>_<report mnemonic>_yyyymmdd.csv (e.g. XXX_MDMD_ csv) and will be available in {member_mnemonic}\deliveries\ folder on the AFTS. The file format is as follows: Field Description Format BUSINESS_DATE The business date to which the contents of the file apply Date CONTRACT The physical commodity code, e.g. Y. DELIVERY_MONTH The delivery month. This will be of the form yyyymmdd, where dd will always be 00. CLEARING_MEMBER The clearing member mnemonic (e.g. XXX) SETTLEMENT _ACCOUNT The clearing account (e.g. S, H, W) TOTAL_UNITS CONFIRMED_UNITS DELIVERED _UNDERWAY_UNITS REMAINING_UNITS FAILED_UNITS ADP_UNITS The total number of units in the delivery obligation for the delivery month. The number of units for which delivery has been confirmed to date for the given delivery month. The number of units for which delivery should have occurred but has not yet been confirmed OR for which delivery is underway. The number of units for which delivery has been instructed for future dates within the given delivery date. The number of units for which failure to deliver has been confirmed to date for the given delivery month. The number of units to be delivered using an alternative delivery process for the given delivery month. EDSP The EDSP for the contract for the delivery month. CVM_PRICE The mark-to-market price for the physical commodity used in the CVM calculation. DELIVERY_MARGIN The delivery margin requirement. CVM The total contingent variation margin requirement. 3.4 Deliveries Daily Summary (MDDS-XX-X) The Deliveries Daily Summary reports are Member reports that list, by contract and delivery month/day, the settlement account, the number of deliverable lots (long or short), the tender number, the units to deliver and the progress of the delivery, any buyer s or seller s security held. Please see for ICEU Energy Member Report Specifications. 3.5 Standing Requirements (MBSR) For each business day, the Standing Requirements report reports all standing credits and debits by settlement account (House, Client Segregated, US Customer Segregated Futures etc), by currency, and by Product Code. The requirement types for margining of physically delivered products are: CVM - Contingent Variation Margin DM - Delivery Margin Please see for ICEU Energy Member Report Specifications. Page 9

10 4 Examples 4.1 Example Marginable Open Position Calculation Business Date = 15-Jul-11 CONTRACT CLEARING MEMBER SETTLEMENT ACCOUNT CUSTOMER LONG POSITION SHORT POSITION DELIVERY CONFIRMED UNITS DELIVERY UNDERWAY UNITS REMAINING LOT SIZE TTF XXX C AAA TTF XXX C BBB TTF XXX H XXX MARGINABLE OPEN TTF POSITIONS FOR C SETTLEMENT ACCOUNT -10 MARGINABLE OPEN TTF POSITIONS FOR H SETTLEMENT ACCOUNT 50 Page 10

11 4.2 Example Delivery Margin and Contingent Variation Margin Calculation BUSINESS DATE Current date COMMODITY ID Physical commodity code CONTRACT PERIOD Delivery month of the contract DELIVERY CURRENCY Contract currency. All margin figures will be reported in the product currency DELIVERY MARGIN TYPE P - A percentage of contract value. A - An absolute amount per unit traded. DELIVERY MARGIN RATE Value is quoted in the contract currency. Please note that If the margin type is P the figure is divided by 100. UNIT Deliverable contract unit BASE LOT SIZE Deliverable total contract size CONTRACT DELIVERED LOT SIZE Contract delivered units PREVIOUS DAY CONTRACT DELIVERED LOT SIZE Contract delivered units DELIVERY SIZE Contract units to be delivered on "BUSINESS DATE"+2. REMAINING REMAINING LOT SIZE LONG LOT SIZE SHORT Contract remaining units- Long. This figure will be used for the delivery margin (DM) and the contingent variation margin (CVM) calculations for the long position. Contract remaining units- Short. This figure will be used for the delivery margin (DM) and the contingent variation margin (CVM) calculations for the short position. EDSP the expiry. Reported in major currency listed in column D. CVM PRICE Price used to calculate the contingent variation margin. Reported in major currency listed in column D. PRICE CONVERSION FACTOR Factor to convert the contract trading price i.e. SPAN price to major currency unit [SPAN price * Price Conversion factor]. ACCUMULAT ED_DELIVERY _SIZE Total accumulated number of delivery units on the business day + 2. BUYER'S TOP-UP LOT SIZE Buyer's Top-Up Units BUYER'S TOP-UP TYPE P - A percentag e of contract value. A - An absolute amount per unit traded. BUYER'S TOP-UP RATE Value is quoted in the contract currency. Please note that If the margin type is P the figure is divided by 100. SELLER'S SECURITY LOT SIZE Seller's Security Units SELLER'S SECURITY TYPE P - A percentag e of contract value. A - An absolute amount per unit traded. SELLER'S SECURITY RATE Value is quoted in the contract currency. Please note that If the margin type is P the figure is divided by Jul-11 M GBP P 5 Therm A A Jul-11 NGM EUR A 10 Mwh A A Jul-11 TTF EUR A 23 Mwh A A Jul-11 G USD P 5 mt P 0.5 P 0 15-Jul-11 Y GBP P 6 Mwh A A 10 Example: On 15 July 2011, Member XXX has 50 lots Long Jul-11 Dutch TTF Natural Gas position Delivery Margin = MARGIN RATE * # of lots * CURRENT LOT SIZE LONG Contingent Variation Margin = # of lots * CURRENT LOT SIZE * (CVM PRICE - EDSP) Buyer's Top-up = # of lots * BUYER'S TOP UP LOT SIZE * BUYER'S TOP UP RATE Delivery Margin = 23 * 50 * 288 = Contingent Variation Margin = 50 * 288 * ( ) = Buyer's Top-up = 50 * 120 * 0.35 = Example: On 15 July 2011, Member XXX has 50 lots Short Jul-11 Dutch TTF Natural Gas position Delivery Margin = MARGIN RATE * # of lots * CURRENT LOT SIZE LONG Contingent Variation Margin = # of lots * CURRENT LOT SIZE * (CVM PRICE - EDSP) Seller's Security = # of lots * SELLER'S SECURITY LOT SIZE * SELLER'S SECURITY RATE Delivery Margin = 23 * 50 * 288 = Contingent Variation Margin = -50 * 288 * ( ) = 6624 Seller's Security = 50 * 120 * 0.35 = Delivery Margin is an absolute value - always need to be funded. Negative sign for short position. Credit Contingent Variation Margin