(UNOFFICIAL TRANSLATION)

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1 Readers shuld be aware that nly the riginal Thai text has legal frce and this English translatin is strictly fr reference. Thailand Clearing Huse Cmpany Limited cannt undertake any respnsibility fr its accuracy nr be held liable fr any lss r damages arising frm r related t its use. Ntificatin f Thailand Clearing Huse C., Ltd. Re: Calculatin f Daily Risk Value in the Securities Clearing and Settlement System (Early Warning) As TCH s Regulatin requires TCH t determine the methd f calculatin f the daily risk value in the Securities clearing and settlement system (Early Warning) f general Members in rder t cntrl the risk value in the Securities clearing and settlement system. Where the Member s risk value is in excess f the level calculated by TCH, such general Member must place cllateral in accrdance with the cllateral requirement which TCH will call frm general Members. Thus, TCH annunced the Ntificatin f Thailand Clearing Huse C., Ltd. re: Calculatin f Daily Risk Value in the Clearing, dated 20 Octber 2017 fr calculatin f the daily risk value in the Securities clearing and settlement system (Early Warning). TCH has repealed such ntificatin and determined the methd fr calculatin f the daily risk value in the Securities clearing and settlement system (Early Warning) f general Members in accrdance with the attachment heret. This Ntificatin shall cme int frce frm 1 August 2018 nwards. Annunced n 6 July 2018 (Signed) Pataravasee Suvarnsrn (Miss. Pataravasee Suvarnsrn) Managing Directr Thailand Clearing Huse C., Ltd. Page 1 f 5

2 Frmula fr the Calculatin f the Risk Value in the Securities Clearing and Settlement System (Early Warning) TCH determines the calculatin f the risk value in the Securities clearing and settlement system as fllws: Variables used in the calculatin It is determined that CSV MV Expsure Prt Expsure Client MTM Expsure VaR Prt Client CF Stress Test Ttal CF RF EWS Cllateral Requirement Uncvered Risk Cllateral Requirement Cllateral Submitted is the Cumulative Settlement Value is the market value f the pending settlement securities (Market Value) is the ptential lss value arising ut f trading in the huse s accunt is the ptential lss value arising ut f trading in the client s accunt is the ptential lss value arising frm a change in the market price f securities (Mark-t-Market Expsure) is the highest lss which may ccur at the designated cnfidence level (Value at Risk) is the level f vlatility f a grup f net pending securities settlement in the huse s accunt, which is measured by the Standard Deviatin f the rate f return f such grup f securities, by taking int accunt the number f days n which TCH can liquidate the psitin f such grup f securities (Prtfli Sigma) is the level f vlatility f a grup f net pending securities settlement in the client s accunt, which is measured by the Standard Deviatin f the rate f return f such grup f securities, by taking int accunt the number f days n which TCH can liquidate the psitin f such grup f securities (Prtfli Sigma) is the amunt f clearing funds cntributed by a member is the maximum lss that might ccur under a hypthetical event where there is an extreme mve but plausible market cnditins (Stress Event) as prescribed by TCH. is the amunt f Clearing Fund which includes cntributins made by all members and by SET (Ttal Clearing Fund). is the reserve fund frm SET (Reserve Fund) is the value f cllateral which a member must place with TCH t accmmdate the lss that may arise frm the Securities clearing and settlement transactin is the value f cllateral which a member is required t place with TCH in rder t cver the maximum lss that might ccur under a Stress Event. is the value f cllateral which a member has placed with TCH Ntificatin f Thailand Clearing Huse C., Ltd. Page 2 f 5

3 Cllateral Call Calculatin Methd is the value f cllateral called by TCH frm a member 1) Calculatin f Expsure Expsure = -(CSV + MV) Expsure is calculated as the difference between the CSV and MV. Prfit (Expsure is less than zer) r lss (Expsure is mre than zer) will arise frm the Mark-t-Market f securities. Therefre, a member will cause a risk t TCH if Expsure is mre than zer. If a member has net buy transactins: the CSV will be less than zer because the member must deliver mney t TCH in accrdance with the CSV fr settlement. the member may cause a risk t TCH if it appears that the MV is less than the CSV. If a member has net sell transactins: the CSV will be mre than zer because the member receives mney in accrdance with the CSV fr settlement frm TCH. the member may cause a risk t TCH if it appears that the MV is mre than the CSV. TCH shall calculate Expsure arising frm trading in the huse s accunt and Expsure arising frm trading in the client s accunt separately. 2) Calculatin f Mark-t-Market Expsure MTM Expsure = Expsure Prt + Max (0, Expsure Client ) MTM Expsure is the prfit (MTM Expsure is less than zer) r the lss (MTM Expsure is mre than zer) calculated frm the prfit/lss arising frm trading in the huse s accunt and the lss arising frm trading in the client s accunt nly (Expsure Client is mre than zer) under the principle f separate accunts and assets in accrdance with the Securities and Exchange Act. Therefre, a member will cause a risk t TCH if MTM Expsure is mre than zer. TCH may ffset the prfit arising frm the Mark-t-Market f securities arising frm trading in the huse s accunt (Expsure Prt is less than zer) against the lss arising frm the Mark-t-Market f securities arising frm trading in the client s Ntificatin f Thailand Clearing Huse C., Ltd. Page 3 f 5

4 accunt (Expsure Client is mre than zer). TCH will nt ffset the prfit arising frm trading in the client s accunt (Expsure Client is less than zer) against the lss arising frm trading in the huse s accunt (Expsure Prt is mre than zer). 3) Calculatin f the value at risk which may ccur at the cnfidence level f 99% (Value at Risk: VaR) VaR = (Expsure Prt Prt ) + Max {0, (Expsure Client Client )} Explanatin : The VaR equals the sum ttal f the VaR arising frm trading in the huse s accunt at the cnfidence level f 99% and the VaR arising frm trading in the client s accunt at the cnfidence level f 99%. In term f calculatin f the VaR, the TCH will accunt nly the lss arising frm trading in the client s accunt. 4) Calculatin f the EWS Cllateral Requirement Where MTM Expsure > three times f and VaR > seven times f EWS Cllateral Requirement = Max (MTM Expsure, VaR) - CF Where MTM Expsure > three times f and VaR < seven times f EWS Cllateral Requirement = MTM Expsure - CF Where MTM Expsure < three times f and VaR > seven times f EWS Cllateral Requirement = VaR CF Where MTM Expsure < three times f and VaR < seven times f EWS Cllateral Requirement = 0 If MTM Expsure is higher than three times f, and the VaR at the cnfidence level f 99% is higher than seven times the amunt f such member s CF. The cllateral value that a member is required t place with TCH is equal t the higher value between MTM Expsure and the VaR at the cnfidence level f 99%. When such higher value if btained, it shall be deducted by CF. If MTM Expsure is higher than three times f, and the VaR at the cnfidence level f 99% is lwer than r equal t seven times f such member s CF. Ntificatin f Thailand Clearing Huse C., Ltd. Page 4 f 5

5 The cllateral value that a member is required t place with TCH is equal t MTM Expsure deducted by CF. If MTM Expsure is lwer than r equal t three times f such member s CF,and the VaR at the cnfidence level f 99% is higher than seven times f. The cllateral value that a member is required t place with TCH is equal t the VaR at the cnfidence level f 99% deducted by CF. If MTM Expsure is lwer than r equal t three times f member s CF, and VaR at the cnfidence level f 99% is lwer than r equal t seven times f such member s CF, the member is nt required t place cllateral with TCH because the member has nt caused mre risk t TCH than it has prescribed. In calculating the cllateral value that a member is required t place with TCH, if TCH is f the pinin that the member s financial status and liquidity may affect the Securities clearing and settlement transactin, TCH may calculate the cllateral value that a member is required t place with TCH accrding t the cnditins TCH deems apprpriate. 5) Calculatin f the cllateral value that a member is required t place with TCH t cver the maximum lss that might ccur under a Stress Event (Uncvered Risk Cllateral Requirement). Uncvered Risk = Max (0, Stress Test Ttal CF RF) Cllateral Requirement 6) Calculatin f the cllateral value called by TCH frm a member (Cllateral Call) Cllateral Call = Max (0, EWS Cllateral Requirement Cllateral Submitted, Uncvered Risk Cllateral Requirement Cllateral Submitted) The Cllateral Call is equal t the greater f the difference f the cllateral value that a member is required t place with TCH in rder t cver lss that might ccur frm EWS Cllateral Requirement and the cllateral value that such member has already placed with TCH (Cllateral Submitted); and the difference f the cllateral value that a member is required t place with TCH in rder t cver the maximum lss that might ccur under a Stress Event (Uncvered Risk Cllateral Requirement) and the cllateral value that such member has already placed with TCH (Cllateral Submitted). TCH shall require the member t place cllateral nly when the result f the calculatin is greater than zer. ************************************** Ntificatin f Thailand Clearing Huse C., Ltd. Page 5 f 5