Implementation of the model of cross-product netting of initial margins – amendments to IRGiT’s regulations
Izba Rozliczeniowa Giełd Towarowych S.A. (“IRGiT”) has amended the Detailed Clearing and Settlement Rules of the Exchange Clearing House (“Detailed Clearing and Settlement Rules”). The main goal of the amendment was implementing the cross-product netting model (BASE/PEAK/OFFPEAK) on the Electricity Forward Market and it involved, in particular: adjustment of the provisions setting forth the method of calculating initial margins for this market to take into account the cross-product netting component, and adding § 17a to the Detailed Clearing and Settlement Rules introducing the relevant calculation algorithms.
The implementation of cross-product netting completes the first of the two implementation stages of the comprehensive netting model recommended by the IRGiT Risk Committee. The purpose of the implemented changes is to increase efficiency of the collateral model used by IRGiT, while maintaining the current high level of safety of the clearing process.
Moreover, the amendments to the Detailed Clearing and Settlement Rules include clarification of the rules governing the order of recognizing non-cash collateral as collateral margin.
The cross-product netting model will be launched on 1 September 2020 and the new version of the Detailed Clearing and Settlement Rules will come into effect on the same date.