The exchange adopts various tools and practices to protect the market participants
against adverse market conditions. It identifies and evaluates the risks through
Risk Preventive Measures.
Different level of Collateral warning (i.e. margin utilization) limits have been defined by the Exchange based on the margin utilized % of Trading Members & Clearing Members against their positions.
The trading members/clearing members are mandatorily put in risk-reduction mode when 90% of the member’s margin limit gets utilized. The risk reduction mode shall include the following:
a. All unexecuted orders shall be cancelled once trading member himself or his clearing member breaches 90% collateral utilization level.
b. Only Market & Limit orders with Immediate or Cancel (IOC) validity shall be permitted in this mode.
c. All new orders shall be checked for sufficiency of margins and such potential margins shall be blocked while accepting the orders in the system.
d. The trading member shall be moved back to the normal risk management mode (i.e. revoked from RRM mode) as and when the margin utilization level of the trading member as well as his clearing member goes below 89%.
During the trading session, the system keeps track of loss, both notional and booked, incurred by every member up to the last
executed trade. Based on this MTM loss, the Exchange has defined different level of MTM alerts as a measure of risk management.
The trading members/clearing members of the Exchange shall get MTM warning alerts on real-time basis. For calculation of MTM loss,
the MTM loss limit is specified as 100% of the total margin limit.
Four types of alerts get generated for breach of MTM limit % at Member level.
As the MTM loss reaches below MTM deactivation limit%, the square off mode will be revoked and an alert will be sent for the same.
Daily Price Range (DPR Limit): Each contract has a fixed price band. The
trade is allowed within the given price range. The range is typically fixed through
a standard percentage as per the daily price volatility of the commodity. In case
of special circumstances based on the fundamentals of the commodity the daily price
range is revised.
Mark to Market of Positions on Daily basis: All the outstanding position
of the market participants are marked on daily basis to the closing market price
of the contract. The mechanism ensures that the gain/loss relative to commodity
price movement is adjusted on daily basis by debit/credit of respective members
settlement account before commencement of the trade next day.
Value at Risk (VaR) measures the largest loss likely to be suffered on a portfolio position over a particular period with a given confidence level. VaR is measured in three variables: the amount of potential loss, the probability of that amount of loss and the time frame.
The members are requested to forward all their clearing & settlement related correspondence on the following address:
Indian Commodity Exchange Limited (ICEX)
Clearing & Settlement Department
Reliable Tech Park, 403-A, B-Wing, 4th Floor, Thane-Belapur Road,
Airoli (E), Navi Mumbai – 400708, Maharastra, India.