AvenirCCP

Central Counterparty Clearing Houses

AvenirCCP is a product to assist markets to introduce a standards-compliant CCP for both derivatives and cash products. It also has all the features needed to get rapid approval from regulators and other stakeholders.

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AvenirCCP was built from the ground up to meet the needs of both new and established CCPs. It meets established international best practice and the CPMI-IOSCO PFMIs. AvenirCCP supports a wide range of instrument types — cash equities and bonds, index, bond and stock futures, commodity futures, FX futures, options on futures and single stock options including cash and physical settlement options. It can be enhanced with Avenir’s Advanced Risk Management toolkit to meet all requirements for stress testing and back testing.

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 various clearing accounts in real time.

Positions

Our system allows for many account types (proprietary, client segregated, client omnibus, Non-clearing member). Positions can be netted or non-netted, depending on the settings for the account. The system provides give-up/take-up facilities to move positions between accounts and Clearing 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 in 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.

The system also supports position limits and open interest ratio monitoring, again with graphical displays and alerts.

Connectivity can be provided to an external margin calculator (such as PC-SPAN) if required.

Collateral

The 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

Our real-time risk management tools help protect the clearing house by ensuring that no account ever reaches a situation when there is insufficient 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
Grouping accounts for risk management purposes
Transferring positions from defaulting CM to a non-defaulting CM

Settlement

For futures and options, settlement of cash-settled products can be achieved 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.