General Description

Basic principles

1. Trading hours on the Derivatives Market:
1. 10:30am – start of the trading session;
2. 1pm - 1:03pm –intraday clearing session;
3. 5:30pm – end of the trading session, start of the evening clearing session.
2. During the trading process orders are matched into trades in the course of a continuous double auction.
3. Trading and settlement of all transactions is facilitated by a central counterparty, which allows for anonymous trading and settlement. Traders don’t receive any information about the participant who has sent the opposite order.
4. A trader can make a transaction with a counterparty of choice. To do this, the trader needs to specify the counterparty’s register and submit a direct order.
5. Cash posted as Initial Margin is accumulated in the Central Counterparty’s account set up with the settlement bank. The size of Initial Margin to be put up by Exchange Members is determinate by the Exchange and depends on the risks associated with each instrument. Exchange Members can increase or decrease the Initial Margin requirement for their Clients by adjusting the Initial Margin coefficient.

Settlement guarantees

The Exchange ensures performance of settlement obligations by the Exchange Members with the help of three guarantee funds:

Funds accounting (accounts opening scheme)

1. The Central Counterparty:
1. Keeps track of all transactions in the derivatives contracts.
2. Uses settlement bank for custodian services.
2. The Exchange registers Exchange Members (Clearing Members). The Exchange Member registers its Clients (opening sections of the positions register) with the Exchange.
3. Cash funds are accounted for in sections of clearing registers that are registered with the Exchange.

During the trading process:

The Central Counterparty (CCP) provides for anonymous trading and settlement.

Open interest accounting:

The total number of long positions is always equal to the total number of short ones.

1. Traders submit orders to the Trading System of the Exchange:
1. Bid and ask orders for futures contracts with an indication of the Client’s trading register;
2. Orders for withdrawal of cash indicating the Client’s trading register.
2. The Exchange checks automatically the funds sufficiency and blocks Initial Margin in the amount which depends on the total risk of the position (including orders). In the presence of opposite orders the Exchange’s matching engine matches them into a trade automatically and the number of derivatives contracts and cash balances recorded in the trading registers are adjusted to account for the executed trades.
3. The Exchange informs the Exchange Members of the current open interest and cash balances recorded in the trading registers through the trading system in real-time.
4. During the intraday clearing session that is held from 1:00 to 1:03 pm reports are prepared, risks arising from positions of market participants are estimated, and Initial Margin is recalculated.
5. At 5:30 pm the evening clearing session starts during which Initial Margin is recalculated and the settlement price is determined. All open positions as of the end of the day are marked-to-market at the above-mentioned settlement price by changing the cash balance recorded in the trading register.

Based on the trading results

During the evening clearing session:

1. Orders without expiration date (submitted by participants) are deleted from the Exchange’s trading system.
2. Parameters of Initial Margin calculation are changed.
3. Settlement prices are determined.
4. Trading results are processed.
5. Mutual obligations are determined, offset and settled by the Exchange.
6. The cash recorded in the trading registers (after Variation Margin was credited/debited) debased on the results of the evening clearing session remains in the trading registers until the next trading day.
7. Data is uploaded into the trading system.

Trading reports

The Exchange generates and distributes trading reports based on the intraday clearing session and the evening clearing session.
Intraday clearing session:

1. Report on the results of trading in futures contracts.
2. Preliminary report on the Exchange Member’s cash funds on the derivatives market.
3. Report on the results of trading in options contracts

Evening clearing session:

1. Report on futures trades;
2. Report on options trades;
3. Report on the results of trading in futures contracts;
4. Report on the results of trading in options contracts;
5. Report on obligations under futures contracts;
6. Report on obligations under options contracts;
7. Report on the Exchange Member’s cash funds on the derivatives market;
8. Report on operations by sections of the cash register;
9. Report on sections of positions register;
10. Report on operations with Exchange Member’s futures orders;
11. Report on operations with Exchange Member’s options orders;

System architecture

Documents

1. Sample Form of a Futures Contract (pdf, 119 Kb)