Rules of monitoring position concentration limits
KDPW monitors the concentration of positions and may set limits on the concentration of positions.
A position concentration limit determines the maximum permissible concentration of positions, which is understood as the sum of the ratios of the absolute values of equivalent positions calculated for the clearing member to the sum of the absolute values of equivalent positions of all clearing members, determined for a given class of derivatives and a given point of the yield curve, where equivalent positions are understood as risk-equivalent positions calculated in relation to the positions recorded in a clearing account held for the clearing member, in a given class of derivatives and a given point of the yield curve.
If a limit of concentration of the number of open positions is breached, KDPW_CCP calls the clearing member to provide KDPW_CCP with detailed information on the reasons for the limit breach, the method of hedging the exposure, and the plan of restoring compliance with the limit.
As a result of analysing of the utilisation of the concentration limit and the information provided by the member, KDPW_CCP is entitled to assess the risk related to the limit breach and to take the following actions:
- refuse acceptance of further transactions for which the member is designated as the clearing member (§ 48 subpara. 7 of the Rules of transaction clearing (non-organised trading));
- request the clearing member to reduce the exposure to the instrument (§ 87 subpara. 8 of the Rules of transaction clearing (non-organised trading));
- pass a resolution temporarily raising its obligations in respect of initial margins calculated on the basis of an indicator set in the resolution;
- decide not to take any actions with respect to the participant in view of low estimated significance of the concentration risk.