Risk Management Procedures

The Risk Management department monitors counterparty risk exposures against a range of risk limits on a daily and an intra day basis.

Intra day risk monitoring

The Risk Management department monitors the markets on a continuous basis during the trading hours. The effect of large price movements or news relevant for the markets is analysed. The trading activities and change in positions of the members are monitored intra-day. Particular attention is paid to positions which are large in relation either to a member’s financial resources or internal exposure limit, or to open interest in a particular contract or product group.
The QeptaTM clearing system is calculating margin requirements real-time following new trades, and provides real-time alerts related to margin utilisation and price movements as specified by the Risk Management department.

Intra day margin call

The adequacy of initial margining cannot be considered in isolation from the approach to the calling of additional margin within the course of a business day. Additional intra-day margin is called by NOS if price movements in a contract challenge the adequacy of the prevailing risk interval or if excessive trading requires more collateral in order for the trades to be cleared.

Surveillance and margin parameters

The adequacy of the risk intervals is monitored both real-time intra-day, and based on historical analysis.
Other margin parameters, such as time and intercommodity spread credits are reviewed on a regular basis on the basis of back-testing. Breaches of margin parameters are logged in the internal control system. If market conditions require it, margin parameters are changed on short notice. Under normal market conditions margin parameters are assessed monthly and changed if needed on five days notice.