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Collateral Management. Indonesian Clearing and Guarantee Corporation (KPEI) Indonesia Stock Exchange Building, Tower 1 4-5 th Fl Jl. Jend. Sudirman Kav. 52 – 53 Jakarta - INDONESIA. The ACG Cross Training, Dhaka 2-5 July 2009. Agenda. Overview
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Collateral Management Indonesian Clearing and Guarantee Corporation (KPEI) Indonesia Stock Exchange Building, Tower 1 4-5th Fl Jl. Jend. Sudirman Kav. 52 – 53 Jakarta - INDONESIA The ACG Cross Training, Dhaka 2-5 July 2009
Agenda • Overview • Collateral Structure for Equities, Bonds, and SBL Transactions • Acceptable Collateral Criterion • Collateral Valuation • Perfect Collateral • KPEI Financial Buffer (for Defaulting Members) • Risk Management Development at KPEI
Overview • Collateral as one of Risk Management Tools in KPEI. • Collateral Management: • Must be valued properly • Must be sufficient • Comparison against Exposure / Outstanding Positions • Part of Trading Limit Calculation (Equities, Bonds Market, SBL Transaction) • Collateral Management Development
General Scheme of Risk Management KPEI kpei Placement / Margin Call Collateral Netting/Novation Member Memberships Req and NAWC Right/Obligation Risk Calculation Trading Limit Risk Exposure - SX Trading Free Collateral Guarantee Fund Management GF Charge
Bank Guarantee Stock Exchange Seat Time Deposit Gov Bond Treasury Bills (SBI) Offline Collateral Online Collateral Total Collateral Cash Securities COLLATERAL STRUCTURE Account 004
Instruments Acceptable as Collateral Offline Collateral (ownership documents given to KPEI) • Time Deposit (IDR and US$) - haircut: 2% - 5% • Bank Guarantee (IDR and US$) - haircut: 5% • Stock Exchange Membership Seat (Equity and Fixed Income) • Indonesian Government Bonds (Fixed Rate, Variable Rate and Retail) - haircut: 10% - 20% (could also be place in online collateral account) • BI Treasury Bills (Sertifikat Bank Indonesia) - haircut: 5% Online Collateral (linked to the Indonesian Central Securities Depository) • Cash - currently national currency (IDR) and (USD) - future; other currencies (Euro, Yen, etc). • Listed securities - Stocks, Indonesian Government Bonds, Corporate Bonds - haircut: 5% - 100%
Online Collateral Valuation • Cash (IDR), - valued 100 % (No Haircut) - get interest from participating banks • Acceptable Securities, - marked to market, lowest price in last three trading days. - haircut determined by fundamental & market analysis (liquidity & volatility)
COLLATERAL VALUATION Online Collateral in Collateral account at KSEI : ---------------------------------------------------------------------------------- Collateral Valuation =============================================================================== Cash 100 % Securities (Lowest Price andHaircut ) Offline Collateral deposited to KPEI : ------------------------------------------------------------------------------------------------ CollateralValuation ============================================================== Time Deposit (IDR) 98 % Time Deposit (US$) 95 % Bank Guarantee 95 % Stock Exchange Memberships IDR 50.000.000 SBI (Certificate of Central Bank) 98% Bonds Haircut from Rating
MARKED TO MARKET • Marked to market is done when there is a new lowest / highest price of securities • Adjustment of collateral and exposure is done two times a day: • Interday: • End of day • Intraday: • End of first session • Every 30 minutes (in progress)
What is Perfect Collateral ? • Perfect Collateral is securities owned by CM in Delivery Acc./and Collateral Acc. that match with CM’s outstanding obligations • If CM has obligations to deliver the same stocks which its own in Delivery Acc. / and Collateral Acc., then those obligations will be released. It’s called perfect collateral until settlement date due (T+3).
Deliver Securities /Cash 002 & 004 Decreasing Blocked Collateral Similar Securities / Cash ? Yes Perfect Collateral No No Changing on Blocked Collateral How ?
Collateral Placed in KPEI Acc. Total Collateral Value (Offline & Online) placed in KPEI Acc. as of 29/05/2009: IDR 6.300.332.855.416 (US$ 630.033.285) Consist of : - Offline Collateral : IDR 4,139,270,765,063 (US$ 413,927,076) - Online Collateral : IDR 3,614,182,147,574 (US$ 361,418,214) - Cash : IDR 355,819,101,705 (US$ 35,581,910) - Securities : IDR 3,258,363,045,869 (US$ 325,836,304) Currency Notes: US$ 1 = IDR 10,000
Guarantee Funds Positions Guarantee Funds managed by KPEI as of 29/05/2009: IDR 978,409,578,437,- (US$ 97,840,957) Currency Notes: US$ 1 = IDR 10,000
KPEI Financial Buffer Based on Government Regulation (Bapepam) No.III.B.6: Guarantee for Transactions in SX 1. Cash in Defaulting Member’s Collateral Account, 2. Selling Out Securities in Defaulting Member’s Collateral Account, 3. Credit Line from Banks, 4. Reserved Funds from part of KPEI’s Current Year Pre-Tax Earning 5. Selling Out Defaulting Members’ SX Memberships, 6. Guarantee Funds, as of 29/05/2009: IDR 978,409,578,437 (US$ 97,840,957) 7. Credit Ring from All Clearing Members of KPEI Currency Notes: US$ 1 = IDR 10,000
Risk Management Development at KPEI • Risk exposure calculation: • Hs VaR at portfolio basis • Net exposure as sum of three days outstanding positions exposure • Exposure calculation up to client level • Collateral Management Development: • Pool collateral account (Clearing Member account) and client’s subaccount • Eligibility for collateral allocation • Update free collateral (exposure and market data at near real time basis)
