Oslo Clearing ASA Self Assessment ESCB-CESR Recommendation

Clearing holds its main liquidity facility with commercial banks, but has also pledged
securities for a liquidity facility at the Central Bank of Norway (Norges Bank).
For the derivatives segment, and subject to the clearing member having full
segregation of its end-client, Oslo Clearing has an unconditional right to port out the
end clients from the defaulting clearing member to another clearing member, but also
to appoint this clearing member as the receiver of the end clients.
Assignment of assessment:
Oslo Clearing measures the potential exposures of participants at least once a day
and the information on which the calculations are based is timely. Oslo Clearing has
the capacity to recalculate the exposures on an intra-day basis. The risk management
system has thresholds indicating breaches on pre-specified limits (Q1).
Oslo Clearing has in place margin requirements and other risk control mechanisms
designed to limit its exposures to potential losses from defaults by its participants so
that the operations would not be disrupted and non-defaulting participants would not
be exposed to losses that they cannot anticipate or control (Q2).
The recommendation 3 on measurement and management of credit exposures is
observed
4 - Margin Requirements
A CCP should to the greatest extent feasible impose margin requirements to limit its
credit exposures to participants. These requirements should be sufficient to cover
potential exposures that the CCP estimates to occur until the liquidation of the
relevant positions. The models and parameters used in setting margin requirements
should be risk-based and reviewed regularly.
Observing the Recommendation
1. Are margin requirements imposed where feasible? What is the intended coverage
of margin requirements? Are they sufficient to cover at least 99 pct. of the price
movements that the CCP estimates to occur in the interval between the last margin
collection and the time the CCP estimates it will be able to liquidate the relevant
positions? What are these price estimations based on? What is the time interval
consistent with a reasonable assumption about how quickly a defaulting participant's
positions could be closed out? How does the CCP validate the models and parameters
used to determine the margin levels consistent with the intended coverage? How
frequently does it review and validate the models?
Are margin requirements imposed where feasible? What is the intended coverage of
margin requirements?
Margins requirements are imposed on all clearing members for all open positions.
Margins are risk based, and shall cover the expected price movements for a given
closing period within a confidence level of at least 99 pct. for the equity segment and
99,8 pct. for the derivatives segment.
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