Moscow Exchange has increased the dedicated capital of NCC Clearing Bank, its central counterparty (CCP), to RUB 9.5 billion (from RUB 6.5 billion) to add an extra layer of security for participants in on-exchange trading. Dedicated capital (“skin in the game”) is the portion of the CCP’s capital resources that can be used to cover losses in the event of market participants defaulting. NCC Clearing Bank is a wholly-owned subsidiary of Moscow Exchange Group.
In addition to dedicated capital, financial safeguards in place for market participants include member-firms” collateral and a guarantee fund of RUB 9.2 billion (RUB 5 billion from the Exchange and RUB 4.2 billion from clearing firms).
The increase in the CCP’s dedicated capital and the contribution of RUB 5 billion to the guarantee fund form part of an initiative to implement a new CCP safeguard structure (“default waterfall”) agreed with market participants in late 2015. In July 2016 Moscow Exchange introduced collateral for stress, an additional level of protection from the CCP.
Moscow Exchange has developed its CCP safeguard structure to protect non-defaulting trading firms in line with international standards and in compliance with the requirements of the Bank of Russia. Since the creation of the CCP, there have been no cases of the guarantee funds or “skin in the game” being needed to cover non-fulfilled transactions, as collateral funds were sufficient to satisfy market participants” claims.
As of 29 September 2016, NCC Clearing Bank”s own capital stood at RUB 54 billion.