BMSC and BMDC as Central Counterparty (CCP)
Derivatives Margin
BMDC adopts a gross margining concept where each client account of a CP is margined separately. At client account level, the margin requirement is computed using CME SPAN methodology. The total performance bond for a CP is the sum of the margins for all the individual client's accounts of the CP. The proprietary position of a CP is margined separately.
The following is the list of Approved Collaterals for Initial Margin:
- Approved Currencies: Australian Dollar, British Pound, Euro, Hong Kong Dollar, Japanese Yen, Malaysian Ringgit, Renminbi, Singapore Dollar and US Dollar.
- Constituents of the FTSE Bursa Malaysia Top 100 Index, with 30% valuation haircut.
- Letters of Credit in MYR and USD issued by approved Malaysian banks.
The collaterals accepted are subject to a valuation haircut as well as cross-currency haircut if the denominated currency is different from margin requirement currency.
Performance bond requirement is computed at the end of each business day and all CPs with margin shortfall are required to make good the shortfall prior to commencement of trading on the next business day.The Clearing House monitors CP's trading activities and intra-day price movement closely to assess its potential exposure. In periods of extreme market volatility, BMDC may activate the mark-to-market process during the trading day for trades executed up to that point in time. Having two or more mark-to-market and settlement sessions in one trading day effectively changes the duration of BMDC's exposure from one day to segments of a day. The losses have to be paid to BMDC within one hour of the intra-day margin call being made. New positions entered into up to that point in the trading day will also have a margin obligation which has to be settled within the hour.
Any update on the Margin Rates, Approved Collateral and haircut will be communicated from time to time via the Clearing Circulars.