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What Is Clearing Guarantee Fund System?
2010-11-24

 

Clearing guarantee funds refer to co-guarantee funds paid by clearing members according to regulations of the CFFEX to offset their default risks. The system of co-guarantee by clearing members ensures a large sum of co-guarantee funds at the very beginning of stock index futures market operation and powerfully supports the stable operation of market by increasing the CFFEX’s financial sources to deal with risks, establishing a buffer for risk dissolution and further enhancing the CFFEX’s risk resistance capability.

 

The classification, calculation and apportionment method of clearing guarantee funds are stipulated in the “Measures of the China Financial Futures Exchange (CFFEX) on Administration of Risk Control”.

 

Clearing guarantee funds are classified into two categories, namely basic guarantee funds and variable guarantee funds. The former refers to the minimum guarantee funds that should be paid by a clearing member for participating in the CFFEX’s settlement and delivery businesses, while the latter refers to the part of a clearing member’s clearing guarantee funds that exceeding the basic clearing guarantee funds and subject to the change of the clearing member’s business volume. 

 

The apportioned clearing guarantee funds for each clearing member is based on the base of the whole market’s clearing guarantee funds stipulated by the CFFEX on the first trading day of each quarter.

 

The CFFEX calculates the apportioned clearing guarantee funds of each clearing member in each quarter according to the base of clearing guarantee funds and their respective business volume proportions.

 

The apportioned clearing guarantee funds for a clearing member in the current quarter = the base of clearing guarantee funds × (20% × the member’s daily average turnover in the last quarter / the whole market’s daily average turnover in the last quarter + 80% × the member’s daily average open interest in the last quarter / the whole market’ daily average open interest in the last quarter)

 

The clearing guarantee funds that should be paid by a clearing member in the new quarter is the larger one between the clearing member’s apportioned clearing guarantee funds and its basic clearing guarantee funds. The CFFEX will transfer the excessive part of the balance of clearing guarantee funds to the clearing member’s special account for clearing guarantee funds, and deduct the required additional clearing guarantee funds from the clearing member’s special account for clearing guarantee funds through banks after the fist trading session on the 5th trading day of a new quarter. Clearing members, which need to supplement their clearing guarantee funds, should deposit the required additional amount into their special accounts for clearing guarantee funds before the 5th trading days at the beginning of a new quarter.

 

The CFFEX may adjust the collection time and total amount of clearing guarantee funds according to market risks, and is entitled to increase the clearing guarantee funds of specific clearing members.