NCC reconfigured risk management system taking into account new realities – CBR

MOSCOW, Jan 19 (Reuters) – The National Clearing Center (NCC) of the Moscow Exchange has decided to massively revise (both lower and higher) market risk rates for shares and depositary receipts traded on the Russian stock market, the CBR said in a review.

The new market risk rates were calculated taking into account the financial position of issuers, as well as the fact that they disclosed financial statements and information on corporate actions, while a floor threshold of 20% was set, reflecting the market volatility observed in autumn 2022.

The measures were taken due to the fact that with the departure of non-residents, Russian retail investors have become the main participants in the stock market, their share at the end of December 2022 was 77%.

In addition, a new category of clearing participants has appeared on the markets of the Moscow Exchange – category B2, which includes participants with a risk of deterioration in their financial position, the Central Bank said.

In relation to this category of participants, there are increased requirements for security under stress.

“The emergence of this category was largely due to the increase in volatility in 2022 and the need to increase the risk protection of NCC while maintaining the ability for clearing participants to trade with partial collateral,” the Central Bank explained.

To implement this initiative, NCC plans to collect from this category of participants an increased amount of collateral for stress, which means that they need to add funds to collateral accounts.

As a result, the NCC will have an increased amount of collateral that can be used in case of stressful events on the market, the Central Bank said.

NCC also changed the mechanism for calculating collateral under stress from weekly to daily in order to reduce the “slippage effect”, when collateral continues to be charged for some time on already closed or significantly reduced positions.

Transfer to the new category is carried out gradually from January 2023. (Elena Factory)