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Risk Management
The overall objective of DGCX Risk Management System is to financially secure the marketplace and its participants at all times, without increasing the operational cost or compliance overheads of market participants. Some of the basic parameters of Risk Management are:
- Real Time margining
- Position Limits
- Daily marking to market
- Daily Price ranges
- Risk Management Framework based on SPAN Methodology
- Payment of Margins
- Clearing Member Commitment
Real Time Margining
The Exposure Limits (Initial Margin) available to any client are monitored on real time basis. The initial margin limits calculated by SPAN based margining system are utilized/blocked immediately on execution of any trade. The clients are alerted at three different levels of utilization, namely reaching 60%, 75% and 90% margin utilization. The initial Margin includes SPAN margins and such other additional margins that are specified by the Exchange from time to time.
The clients are placed in "Square-off Mode", upon reaching 100% utilization of their margin limits , after which these clients can initiate only such trades which would reduce their open positions.
Position Limits
The Exchange may specify and monitor position limits on any or all of the following basis:
- Position limit on Commodity
- Position limit on Contract
- Position limit on Client Level
Daily Price Range
The Daily Price Range is the maximum price movement that is allowed in a particular commodity in any given day. The exchange may decide to change the daily price movements on any commodity from time to time. The various prices limits applicable in the products are as follows:
| Sr. |
Segment |
Commodity |
Daily Price Limits |
| 1 |
Precious Metals |
Gold |
US$ 30 per troy ounce* |
| 2 |
Precious Metals |
Silver |
US Cents 75 per troy ounce* |
| 3 |
Currencies |
Euro |
NO PRICE LIMITS** |
| 4 |
Currencies |
Sterling Pound |
NO PRICE LIMITS** |
| 5 |
Currencies |
Japanese Yen |
NO PRICE LIMITS** |
| 6 |
Currencies |
Indian Rupee |
NO PRICE LIMITS** |
| 7 |
Energy |
Fujairah Fuel Oil |
US$ 25 per metric tonne* |
| 8 |
Energy |
WTI Light Sweet Crude Oil |
NO PRICE LIMITS*** |
| 9 |
Energy |
Brent Crude Oil |
NO PRICE LIMITS*** |
| 10 |
Base Metal |
Steel |
US$ 50 per metric tonne* |
Risk Management Framework based on SPAN Methodology
Initial margin (IM) - The amount that must be deposited by a client at the time of (or before) entering into a contract is called the initial margin. This margin is meant to cover the potential loss in one day. The margin is a mandatory requirement for parties who are entering into the contract. Upon proper fulfillment of all obligations associated with a trader's contractual position, the initial margin is returned to the trader.
Special Margin - The Exchange, in case of additional volatility, may decide to impose special margin as deemed fit from time to time. The special margin could even be imposed on all open positions or any particular contract or commodity. Special margin imposed would be over an above other margins applicable (e.g. Initial Margins, MTM Margin etc.).
Payment of Margins
Minimum Initial Margins prescribed currently (Email sent on 11/11/2008)
| Sr. |
Commodity |
Minimum Initial Margin (Per Contract) |
Calendar Spread Benefit |
Tender/Delivery Margin |
| 1 |
Gold |
$ 1,500 |
100% |
$ 7,500 |
| 2 |
Silver |
$ 1,000 |
100% |
$ 5,000 |
| 3 |
Euro |
$ 1,500 |
100% |
No Tender Margin |
| 4 |
Sterling Pound |
$ 1,900 |
100% |
No Tender Margin |
| 5 |
Japanese Yen |
$ 1,200 |
100% |
No Tender Margin |
| 6 |
Indian Rupee |
$ 1,000 |
100% |
No Tender Margin |
| 7 |
Fujairah Fuel Oil |
$ 1,500 |
$ 240 per spread position |
$ 7500 |
| 8 |
WTI Light Sweet Crude Oil |
$ 5,000 |
100% |
No Tender Margin |
| 9 |
Brent Crude Oil |
$ 5,000 |
100% |
No Tender Margin |
| 10 |
Steel |
$ 600 |
100% |
$ 1,200 |
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