The Futures Market operates through a margin-based risk management framework designed to manage market exposure throughout the contract lifecycle.
The framework combines:
• Margin collection
• Exposure controls
• Daily settlement
• Default safeguards
This enables continuous management of market and settlement risk.
Margin Architecture
VaR-Based Initial Margin : Initial Margin is collected using a Value at Risk (VaR)-based methodology. The VaR model estimates potential adverse market movement over a defined confidence interval and risk horizon. The objective is to ensure adequate financial protection against market exposure.
Minimum Period of Risk (MPoR) : MPoR represents the minimum period assumed to manage and liquidate positions under stressed conditions.
Incorporating MPoR strengthens resilience and supports prudent margin determination.
Margin Components : The Exchange may apply multiple layers of margin controls.
Initial Margin : Protection against normal market movement.
Additional Margin : Applied during elevated market volatility.
Special Margin : Applied under contract-specific or exceptional circumstances.
Concentration Margin : Applied to address concentrated exposures and position risk.
Other Prescribed Margins : Additional controls may be introduced under Exchange rules where required.
Daily Mark-to-Market (MTM) Settlement
Continuous Settlement of Market Exposure Final settlement risk in Futures Contracts is managed through:
Daily Mark-to-Market (MTM) Settlement :Open positions are revalued periodically using settlement prices.Resulting gains and losses are settled on daily basis.
Benefits of Daily MTM
• Continuous realization of exposure
• Prevention of risk accumulation
• Faster loss recognition
• Stronger settlement discipline
Exposure Monitoring Framework
The Exchange continuously monitors:
• Margin Adequacy
• Position Exposure
• Participant Concentration
• Contract Risk
• Settlement Obligations
• Market Conditions