jse securities exchange south africa
DESCRIPTION
JSE SECURITIES EXCHANGE SOUTH AFRICA. Margining Methodology. Margining Methodology. Objectives Process Overview Methodology Results & Examples Implementation Conclusion. JSE SE SA Objectives. Accurate transparent methodology Compensate for volatility, liquidity & deal size risk - PowerPoint PPT PresentationTRANSCRIPT
JSE SECURITIES EXCHANGE JSE SECURITIES EXCHANGE SOUTH AFRICASOUTH AFRICA
JSE SECURITIES EXCHANGE JSE SECURITIES EXCHANGE SOUTH AFRICASOUTH AFRICA
Margining MethodologyMargining Methodology
Margining MethodologyMargining Methodology
Objectives
Process Overview
Methodology
Results & Examples
Implementation
Conclusion
Objectives
Process Overview
Methodology
Results & Examples
Implementation
Conclusion
JSE SE SA ObjectivesJSE SE SA Objectives
Accurate transparent methodology
Compensate for volatility, liquidity & deal size risk
Enable pre-trade risk management
Consistency with SAFEX margining
Secure daily data transfer
Rapid implementation
Accurate transparent methodology
Compensate for volatility, liquidity & deal size risk
Enable pre-trade risk management
Consistency with SAFEX margining
Secure daily data transfer
Rapid implementation
Specific Margin ObjectivesSpecific Margin Objectives
The margin should take into account the specific risk of the position, including the price volatility, liquidity and specific size
(nominal shares) involved from EOD on T+3.
The margin should take into account the specific risk of the position, including the price volatility, liquidity and specific size
(nominal shares) involved from EOD on T+3.
MARGINMARGIN
Relative SpreadRelative Spread SizeSizePrice VolatilityPrice Volatility VolumeVolume
Process OverviewProcess Overview
T T + 1 T + 2 T + 3 T + 4 T + 5
AllocatedBroker
CAPAD REQ ON BROKER
CSDPCommitby 12h00on T + 3
If NO commit, then client toresolve till 10h00 on T + 4
SETTLESUCCESFULLY
If RESOLVED,trade settles
If NOT resolved, position reversed tobroker “reverse substitution” CSDP
must commit by 12 on T+4
10h00T + 4
JSE Fails Management ProcessInitiated
STEP 1 - borrow stock
IF NO STOCKGIVE UP TRADE
2 DAYMARGIN
MethodologyMethodology
MtM uncommitted trades on EOD on T+3
Compute 2-day VaR margin
Scale VaR for liquidity horizon
Adjust margin for position size
Compile margin matrix
Provide information to JSE
JSE margins trades
MtM uncommitted trades on EOD on T+3
Compute 2-day VaR margin
Scale VaR for liquidity horizon
Adjust margin for position size
Compile margin matrix
Provide information to JSE
JSE margins trades
The Margining MatrixThe Margining Matrix
100 200 300 500 1,000 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 100,000 300,000 500,000 1,000,000 2,000,000 DDT 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15%AGL 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 14%ANG 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 14% 23% 28% 35% 46%BAW 9% 9% 9% 9% 9% 9% 9% 9% 9% 9% 9% 9% 9% 9% 9% 9% 13% 17% 22% 28%BOE 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8%CRN 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% 17% 26% 31% 41% 53%DTC 22% 22% 22% 22% 22% 22% 22% 22% 22% 22% 22% 22% 22% 22% 22% 22% 22% 24% 36% 48%SAP 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 14% 20% 26%ASA 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 11% 16%BIL 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 12%FDS 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% 18% 22% 28% 36%INT 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 18% 22% 28% 37%FSR 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6%RMH 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 9% 13% 17%JDG 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% 11% 17% 21% 26% 34%MHH 16% 16% 16% 16% 16% 16% 16% 16% 16% 16% 16% 16% 16% 16% 16% 17% 31% 37% 48% 62%OML 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6%REM 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 8% 12% 16%MCE 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 19%NPK 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 13%ENR 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 17% 27% 33% 41% 54%SBC 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 7% 10%NED 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 12% 15% 19% 25%SOL 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 11% 15%RCH 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 7% 10% 13% 17%IOT 23% 23% 23% 23% 23% 23% 23% 23% 23% 23% 29% 32% 34% 36% 38% 49% 73% 88% 100% 100%BSB 13% 13% 13% 13% 13% 13% 13% 13% 13% 13% 13% 13% 13% 14% 15% 21% 30% 36% 46% 60%MZL 19% 19% 19% 19% 19% 19% 19% 19% 19% 21% 23% 25% 26% 27% 28% 36% 51% 61% 79% 100%EQX 35% 35% 35% 35% 35% 35% 35% 44% 50% 54% 58% 61% 63% 66% 68% 85% 100% 100% 100% 100%MGF 70% 70% 70% 70% 70% 70% 70% 78% 89% 97% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%SOT 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Sec. Codes
Deal Size
NPK
39,500
8%
Visual Matrix GraphVisual Matrix Graph
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
110%
100
200
300
500
1,0
00
5,0
00
10,
000
15,
000
20,
000
25,
000
30,
000
35,
000
40,
000
45,
000
50,
000
100
,000
300
,000
500
,000
1,0
00,0
00
2,0
00,0
00
3,0
00,0
00
5,0
00,0
00
10,
000,
000
DDT AGL
ANG BAW
BOE CRN
DTC SAP
ASA BIL
FDS INT
FSR RMH
JDG MHH
OML REM
MCE NPK
ENR SBC
NED SOL
RCH IOT
BSB MZL
EQX MGF
SOT
11,000
SOT
SAP
FSR
EQX
MGF
ANG
DDT
IOT
200 Securities Example200 Securities Example
0%
20%
40%
60%
80%
100%
120%
0:10
0
201
: 300
401
: 500
601
: 700
801
: 900
1001
: 20
00
3001
: 40
00
5001
: 60
00
7001
: 80
00
9001
: 10
000
2000
1 : 3
0000
4000
1 : 5
0000
6000
1 : 7
0000
8000
1 : 9
0000
1000
01 :
1100
00
1200
01 :
1300
00
1400
01 :
1500
00
1600
01 :
1700
00
1800
01 :
1900
00
2000
01 :
3000
00
4000
01 :
5000
00
6000
01 :
7000
00
8000
01 :
9000
00
1000
001
: 150
0000
2000
001
: 250
0000
3000
001
: 350
0000
4000
001
: 450
0000
AAA
ABC
ABI
ABL
ABR
ACN
ACR
ACY
ADH
ADL
ADO
ADR
ADT
AEC
AEG
AFB
AFE
AFG
AFI
AFL
AFX
AGL
AGS
AHH
AHN
High Risk
Medium Risk
Low Risk
Margin Requirements: AGL v NPKMargin Requirements: AGL v NPK
0%
5%
10%
15%
20%
25%
30%
35%
100
3
00
1,0
00
10,
000
20,
000
30,
000
40,
000
50,
000
300
,000
1,0
00,0
00
3,0
00,0
00
10,
000,
000
AGL
NPK
AGL: Ave Volume 2.7m, Volatility 43.49%
NPK: Ave Volume 1.7m, Volatility 28.63%
AGL: Ave Volume 2.7m, Volatility 43.49%
NPK: Ave Volume 1.7m, Volatility 28.63%
Median Margin ExamplesMedian Margin Examples
0%
20%
40%
60%
80%
100%
120%
100
3
00
1,0
00
10,
000
20,
000
30,
000
40,
000
50,
000
300
,000
1,0
00,0
00
3,0
00,0
00
10,
000,
000
AGL
DTC
NPK
RCH
MGF
11,000
Spread RiskSpread Risk
Relative Spread = (Offer - Bid)/Mid
Quantifies spread as % of asset price
Allows objective spread comparison
Enables spread risk comparison
Implicit risk (cost) of trading
Relative Spread = (Offer - Bid)/Mid
Quantifies spread as % of asset price
Allows objective spread comparison
Enables spread risk comparison
Implicit risk (cost) of trading
RCH Relative SpreadRCH Relative Spread
RCH Relative Spread
0.00%
0.10%
0.20%
0.30%
0.40%
0.50%
0.60%
2/14/00
2/28/00
3/13/00
3/27/00
4/10/00
4/24/00
5/8/00
5/22/00
6/5/00
6/19/00
7/3/00
7/17/00
7/31/00
8/14/00
8/28/00
9/11/00
9/25/00
10/9/00
10/23/00
11/6/00
11/20/00
12/4/00
12/18/00
1/1/01
1/15/01
1/29/01
2/12/01
2/26/01
3/12/01
3/26/01
4/9/01
4/23/01
5/7/01
5/21/01
6/4/01
Date
Sp
rea
d
PET Relative SpreadPET Relative SpreadPET Relative Spread
0%
5%
10%
15%
20%
25%
2/14/00
2/28/00
3/13/00
3/27/00
4/10/00
4/24/00
5/8/00
5/22/00
6/5/00
6/19/00
7/3/00
7/17/00
7/31/00
8/14/00
8/28/00
9/11/00
9/25/00
10/9/00
10/23/00
11/6/00
11/20/00
12/4/00
12/18/00
1/1/01
1/15/01
1/29/01
2/12/01
2/26/01
3/12/01
3/26/01
4/9/01
4/23/01
5/7/01
5/21/01
6/4/01
Date
Sp
rea
d
ESS Relative SpreadESS Relative SpreadESS Relative Spread
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2/14/00
2/28/00
3/13/00
3/27/00
4/10/00
4/24/00
5/8/00
5/22/00
6/5/00
6/19/00
7/3/00
7/17/00
7/31/00
8/14/00
8/28/00
9/11/00
9/25/00
10/9/00
10/23/00
11/6/00
11/20/00
12/4/00
12/18/00
1/1/01
1/15/01
1/29/01
2/12/01
2/26/01
3/12/01
3/26/01
4/9/01
4/23/01
5/7/01
5/21/01
6/4/01
Date
Sp
rea
d
ImplementationImplementation
BrokersBrokersRisCuraRisCura
FTPFTP
EmailEmail
AA
BB
CC
EE
DD
Pre-Trade Risk Analytics
Pre-Trade Risk Analytics
JSE SE SAJSE SE SA
Daily DownloadDaily DownloadRisk EngineRisk Engine
Failed TradesFailed Trades
Margin MatrixMargin Matrix
Pre-Trade Risk AnalyticsPre-Trade Risk Analytics
ConclusionConclusion
Fully covers volatility, liquidity and position size risk
Consistent with SAFEX margining
Tested & ready to implement
Fully automated
Data transfer redundancy
Broker pre-trade risk analysis
Compensates JSE for risk
Fully covers volatility, liquidity and position size risk
Consistent with SAFEX margining
Tested & ready to implement
Fully automated
Data transfer redundancy
Broker pre-trade risk analysis
Compensates JSE for risk