Real-time Risk Management
SIX x-clear Ltd uses a real-time margining model based on the industry-standard Value at Risk (VaR) model. SIX x-clear Ltd Norwegian Branch uses the close-to-real-time MIDAS margin model for equities, derivatives and securities lending & borrowing transactions.
For cash equities and fixed income clearing for Swiss- and UK-based trading venues, margins are applied at the level of open positions for a clearing account by using a historic VaR with a 99% confidence level. All unsettled trades on a Member’s clearing account are summarized per ISIN and currency traded into one position called the open position. As such, a clearing account would have one open position per traded ISIN. The individual risk rating coefficient is determined on the basis of the Member’s credit rating and is used to weight the initial margin. Therefore initial margin requirements increase or decrease depending on the Member's credit rating.
Additionally, a margin validation module is used to quality assess the existing margin levels periodically each day by using a factor risk model with a 99% confidence level using Monte Carlo simulations.
Open positions are computed in real time as trade or settlement information is received. The diagram below gives a high-level overview of the processes involved in the risk management system.
Using its MIDAS margin model, SIX x-clear Ltd Norwegian Branch computes a close-to-real-time margin for all Clearing Members on multi-currency and multi-asset portfolios, taking into account interdependencies between underlying assets where applicable.