A Clearing Member is required to post a minimum Security Deposit of US$500,000*. The Security Deposit can also be utilised towards the total Margin requirement. If the Clearing Member's positions exceed the Initial Margin limit of US$ 500,000, Additional Security Deposits can be placed with the Clearing Corporation both for Proprietary (house) trades, or for Customer trades, if required.

  • Members cannot place orders on behalf of any Customer unless the Initial Margin required by SMX and/or SMXCC for the respective order has been deposited by the Customer, or is forthcoming within a reasonable period of time.
  • The amount of Initial Margin (IM*) required is specific to each futures Contract and is specified in the relevant SMXCC Notice.
  • SMX employs an Exponentially Weighted Moving Average (EWMA) for fixing the Initial Margins against each Contract using the underlying commodity price volatility.
  • Initial Margins thus set are plugged into a system called SPAN (Standard Portfolio Analysis of Risk) which ascertains the maximum potential loss on the total portfolio of the Member using 16 standard scenarios. The Margins on the portfolios of each Customer and Proprietary/House account are computed separately and accumulated for the total Margin requirement of the Member.
  • The Security Deposit (SD*) is continuously blocked with the individual total Margin requirement for each trade, and as and when a new trade is executed.
  • There is no netting between Customer and Proprietary positions in respect of Initial Margins. If a Member has open positions in different Contracts of the same commodity running concurrently, the Member is required to pay Margins separately on each of these Contracts. Similarly, if a Member has open positions in different commodities, the total amount of Margin required is calculated as the sum total of Margins required for each Customer, and for each Contract separately.
  • SMXCC sets exposure limits for all its Clearing Members based on the collaterals deposited by the Clearing Member. Clearing Members in turn will set exposure limits for all their Broker/Remote/Trade Members based on the deposits these Members make with them. Members must collect Margins from their Customers for all open positions held on the Exchange.
  • The calculation of Initial Margins is at trade level and on a real time basis, which implies that for every trade executed by the Member, its allowable exposure limit is correspondingly reduced by the amount of IM payable for each trade. However, if the new trade results in the reduction of the Member's outstanding position, its available exposure limit increases correspondingly. Refer participants to study guide, pg. 44-45 for Intraday Margin Utilisation examples.
  • Alerts are generated and sent to Members at 75%, 85%, 95% level of their allowed exposures. The moment a Member's exposure crosses 100% of its exposure limit, it is not allowed to create any fresh open position and existing pending Orders are deleted from the system. Normally, the Member is allowed to submit Orders which offset the existing open positions.
  • The Exchange may at its sole discretion may disable the trading terminal of the Member, and not allow it to square off its open positions. In this event, a Member can send a fax to the Exchange in the specified format with a request to square-off its positions and in such instances; the Exchange may do so at prevailing market rates. The Exchange does not take any responsibility for losses arising out of such square-off transactions. Even in absence of such a request from a Member, in cases of non-payment of Margins, the Exchange may, if it so desires, square-off the Member's positions.
  • The Initial Margin is notified in advance for respective commodities and Contracts. However, in case of abnormal volatility in any Contract and in order to prevent defaults in the system, the Margin percentage can be increased by the Exchange at any point of time during the life of a Contract. As soon as the Margin percentage is increased, the revised percentage will apply to all existing open positions as well as any new positions. The incremental Margin on existing positions will be blocked out of the existing deposits of the Members and in the event of any shortfall, the Member will be required to make up the deficit immediately, until which time he will be unable to trade.

Customer Margins

  • Initial margin to be collected from Customer within a reasonable period from the trade day.
    • Japanese Yen, not more than 3 business days from the trade day.
    • All other currencies, not more than 2 Business days from the trade day.
  • Members to collect Variation, Delivery and Special Margin as and when required.
  • Cash payments or SMX/SMXCC prescribed instruments.
  • Margin unobtainable from Customer - Member required to take action
  • Margin financing not permitted.

Variation Margins

  • Loss or profit determined by marking open positions to the market at latest market price , i.e
    • Daily settlement price.
    • Last traded price.
  • VM profit if
    • Value of long position has increased
    • Value of short position has increased
  • VM loss if
    • Value of long position decreased
    • Value of short position increased
  • Payable on a T + 1 basis

SMX Variation Margin Calculation

  • Difference between:
    • Daily Settlement Price (end of business day)
    • Price at which contract was bought or sold, or
    • Daily Settlement Price (previous business day)

Is it accurate to say that SMXCC acts as Central Counterparty to Members and trade settlement is guaranteed by SMXCC?

Yes.

Special Margin Payable when:

  • Market conditions volatile, causing large price fluctations
  • When SMX beleives that Clearing Member may be placing SMXCC or any other CM at risk.
    • Position larger than justifiable
    • Not in line with deliverables
    • Record of frequent violations

Delivery Margin

  • Payable during, or immediately prior to period when delivery notice may be issued for a contract.
  • Specified in Contract Specifications
  • Released upon settlement of all delivery obligations

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