BMSC and BMDC as Central Counterparty (CCP)
Equities Margin
The EM Framework adopted by BMSC consists of advance, variation and additional margin. The objective of the advance margin is to cover potential losses arising during liquidation of TCP’s portfolio over the close-out period in the event of a default. Meanwhile, the variation margin is designed to mark to market the portfolio value, and prevent the exposure to be extended beyond one business day. Additional margin is to mitigate the concentration risk of the TCPs’ portfolio and exposure arising from any unsettled position.
Advance Margin
Advance Margin is calculated for all outstanding settlement positions using margin rates derived from risk-based model of corresponding sectorial indices with 99% confidence level and 10-year lookback period. The applicable advance margin rate is as per schedule below and is subject to review by the clearing house.
Equities Margin Rate | |
Variation Margin
Variation Margin is calculated by taking the difference between traded contract value and MTM value. Variation losses must be made good by TCP with collateral. On the other hand, variation gain will not be paid out to TCP but can be applied to offset Advance Margin requirement.
Additional Margin
Concentration Risk Margin – A 5% add-on will be imposed on the advance margin required for a security when the predetermined threshold is exceeded, i.e the outstanding net settlement position for any particular security is greater than 15%of the TCPs’ shareholder fund;
Unsettled Trades Margin – Additional charge imposed on outstanding securities not delivered after scheduled settlement day.
Every TCP’s margin requirement is computed twice daily, once at mid-day and another one at market close. TCPs will be required to make good the shortfall if the gross margin requirement is greater than existing collateral held by BMSC. Notwithstanding the calculated gross margin requirement, all TCPs are required to maintain a minimum collateral of RM250,000 in cash with BMSC. TCPs are allowed to also pledge Standby Letter of Credit or approved shares to meet margin requirement, on top of the RM250,000.