Financial Markets Act, 2012 (Act No. 19 of 2012)RegulationsFinancial Markets Act RegulationsChapter VI : Central Counterparties33. Margin requirements33.6 Portfolio margining |
A central counterparty—
| (a) | must document its approach on portfolio margining; |
| (b) | may allow offsets or reductions in the required margin across the securities that it clears, if the price risk of one security or a portfolio of securities is significantly and reliably correlated, or based on equivalent statistical parameter of dependence, with the price risk of other securities; |
| (c) | must ensure that the correlation or an equivalent statistical parameter of dependence, between two or more securities cleared, is reliable over the look-back period calculated in accordance with Regulation 33.5 and demonstrates resilience during stressed historical or hypothetical scenarios; |
| (d) | must demonstrate the existence of an economic rationale for the price relation; |
| (e) | must ensure that all securities to which portfolio margining is applied are covered by the same default fund, unless the central counterparty can demonstrate in advance to the Authority and to its clearing members how potential losses would be allocated among different default funds and set out the necessary provisions in its rules; |
| (f) | must ensure that where portfolio margining covers multiple instruments, the amount of margin reductions are not greater than 80% of the difference between the sum of the margins for each product calculated on an individual basis and the margin calculated based on a combined estimation of the exposure for the combined portfolio; provided that where the central counterparty is not exposed to any potential risk from the margin reduction, it may apply a reduction of up to 100% of this difference; and |
| (g) | must ensure that the margin reductions related to portfolio margining are subject to a sound stress test programme in accordance with these Regulations. |