June 3, 2016

CCP

AvenirCCP has been designed from the ground up to be an efficient, versatile and cost-effective solution for Central Counterparty Clearing Houses (CCPs). The product provides a solid and robust real-time clearing and risk management framework. AvenirClear offers the complete, end to end CCP process as follows:

Trades

Trades are received from an exchange or OTC market via the industry standard FIX interface, or via the native API of the trading platform. They are validated and enriched and novation (whereby the CCP becomes the seller to every buyer and buyer to every seller) occurs instantly. Participants can see trades allocated to the various clearing accounts in real time.

Positions

System allows for many account types (proprietary, client segregated, client omnibus, Non-clearing member) and positions can be netted or non-netted, depending on the settings for the account. System provides give-up/take-up facilities to move positions between cleaing members.

Risk Management

Avenir provides real time risk management functionality. For each account it calculates:

• Initial margin is calculated using operator entered margin rates or rates provided by its internal Value-at-Risk (VaR) calculator
• Spread margin – inter and intra commodity spread margin is calculated to reduce collateral required for correlated positions
• Variation margin is calculated in real time and settled daily, based upon daily settlement prices calculated by the system
• Delivery margin can be applied to physically settled contracts close to delivery
• Additional margin can be applied on the decision of the risk manager

All margins are calculated real time and the total margin requirement for each account is provided. This margin requirement is compared to the total collateral held. The system displays this ratio graphically and changes colour and issues alerts when collateral usage becomes too high. If the usage breaks a pre-set level, the system can advise the connected trading system to stop receiving orders for the account in question.
System also supports position limit and open interest ratio monitoring, again with graphical displays and alerts.

If customers so require, connectivity can be provided to an external margin calculator (such as PC-SPAN).

Collateral

System has a collateral management system (CMS) that monitors and values the amount of collateral deposited to cover each clearing account. It supports:

• Cash
• Bank guarantees (letters of credit)
• Bonds
• Equities
• Foreign exchange
• Precious metals

If the data feeds are available and configured, the system can value the collateral in real time.
Haircuts can be set for each type of collateral and the net value of collateral calculated. The system can also set and monitor minimum and maximum percentages allowed for each collateral type.

Default Management

The real-time risk management tools help protect the clearing house by ensuring that no account ever reaches a situation where there is not enough collateral to meet a member default. However, if a member or client defaults, the system supports the risk manager by:

• Suspending operations on particular or groups of accounts
• Suspending the CM
• Real time creation of new accounts
• Grouping accounts for risk management purposes
• Transferring positions from defaulting CM to a non-defaulting CM

Settlement

Settlement of cash settled products is effected using a modified daily settlement price process to create a final settlement price on the last day of trading. For physically settled products, processes can be created depending on the delivery rules of the contract.

Customers

The software went into production in Vietnam in October 2017, and has recently acquired a new customer in Lebanon.