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Margin Methodology

Clearing Members are required to post Margins with APEX Clear to protect the Clearing House from potential financial liabilities and obligations arising from the open positions held under a defaulting Clearing Members’ books. APEX Clear requires its Clearing Members to procure all the applicable margins (Variation Margin, Initial Margin, Delivery Margin & Special Margin) from their Customers.

Margin requirements are calculated based on SPAN® Margin Methodology where it considers: 1) the sizes and the distributions of Positions; and 2) the potential price movements (e.g. Price Scanning Range) and other potential price differentials (e.g. Spread Charges). APEX Risk Management unit reviews and sets prudent Margin Parameters to ensure that the margin coverage is at 99% confidence level.

APEX Clear may also impose special margins due to any additional risk concerns such as concentrated positions, excessive exposures, reduced available liquidity, weaker credit quality, large price movements in the physically deliverable contract’s underlying markets or when price limits are breached. The guidelines for Special Margins are as follows:

 

Special Margin Type Guidelines

Position Concentration

 

 When a Clearing Member holds a significant portion of net open position in APEX for a Product, liquidating such positions may adversely affect the Futures Market. APEX Clear may impose additional Special Margins for such situations.

Large Exposure

 

 When a Clearing Member incurs a total stress testing losses (TSTL) that represents more than a certain percentage of the Guaranty fund, APEX Clear may impose additional Special Margin to reduce its exposures to this Clearing Member.

Liquidity Concerns on a Clearing Member

 

 When a Clearing Member’s liquid resources are insufficient to cover its potential margin call, APEX Clear may require the Clearing Member to increase its available liquid resources or impose additional Special Margin to address this concern.

Credit Concerns

 

 

 When a Clearing Member’s credit standing, as assessed through APEX Clear’s internal credit rating model, external credit rating /outlook downgrade of CM or its parent/affiliate, adverse market information/indicators on CM or its parent/affiliate or any other specific issues or concerns relating to the CM, deteriorates, APEX Clear may impose additional Special Margin to address this concern.

Delivery Concerns

 

 When a Contract has entered its Delivery Period and its underlying Cash Market has moved significantly, APEX Clear might impose additional Special Margin to address the risks that a Participant does not meet his delivery obligations and the Margins (Initial Margin and Delivery Margin) from him are not sufficient to cover the losses due to the market movements.

Price Limit Concerns

 

 When a Contract’s settlement price is limited by the preset Price Limit while the contract underlying’s price has deviated further, APEX Clear may impose additional Special Margin to cover the exposure.