Introduction
ECC plans to change the methodology to determine ECC’s total Default Fund and the
allocation of the Default Fund Contributions to Clearing Member. The change will
become effective on 1 September 2023 based on the end-of-day values from 31 August
2023.
Details
The current allocation of Default Fund Contributions consider the Clearing Members
initial margin history over a one year lookback period and the EMIR Netting Cap to
consider the portfolio margin restrictions in Article 27 of the EMIR RTS 153/2013.
The new total Default Fund will be based on the average daily stress test results over
the last month increased by a buffer of 30%. The total Default Fund will be capped at
10% of the average total initial margin (IM) over the last month.
The Default Fund Contribution will be calculated as proportional share of the Total
Default Fund based on the Clearing Member’s equally weighted average IM and stress
loss over intiital margin (SLOIM) share. A minimum of 2% based on the average
Clearing Member IM is applied. There is no change to the monthly update frequency of
the Default Fund Contributions.
If the daily cover-2 stress test scenario result exceeds a share of the total Default Fund,
the excess cover-2 exposure is mitigated via Supplementary Margin call. The
Supplementary Margin process will remain unchanged.
The EMIR Netting Cap will be removed and will be directly integrated into the IM
calculation. The applied margin credits will be capped at 80% for contracts that are
considered to be different products according to the ESMA opinion.
For details regarding the Default Fund methodology and the Supplementary Margin
process please refer to the “Default Fund and Supplementary Margin Methodology”
documentation on the ECC website.
For details regarding the portfolio margining cap please refer to the “ECC Margining
document” on the ECC website.
All parameters are subject to regular review. The applicable values will be published on
ECCs website.