All markets operated by the Hong Kong Futures Exchange will be closed for business from 25 to 26 December 2019 and 1 January 2020 respectively. In order to assure that safeguards are in place against potential market risks that may arise during the aforesaid period when some of the major markets are open, the Clearing House has decided to adopt the following risk management measures:
- The margin levels of Hang Seng Index (“HSI”), Mini-Hang Seng Index (“MHI”), Hang Seng China Enterprises Index (“HHI”), Mini-Hang Seng China Enterprises Index (“MCH”), HSCEI Dividend Point Index (“DHH”), MSCI Asia ex Japan Net Total Return Index (“MXJ”), USD/CNH (“CUS”) and CNH/USD (“UCN”) futures contracts will be increased temporarily after the close of business of T session on 23 December 2019 (i.e. the adjusted margin requirement must be settled on or before 9:15 a.m., 24 December 2019). Details of the temporary margin levels will be announced on 18 December 2019 via a separate circular. The margin levels will be restored to normal after the close of business of T session on 24 December 2019 (i.e. after settling the day-end requirements as of 24 December 2019, Participants may withdraw their margin surplus, if any, in the morning of 27 December 2019 by submitting withdrawal requests via CCMS by 11:00 a.m.).
- Mandatory intra-day variation adjustments on Clearing Participants in the HSI, MHI, HHI, MCH, DHH, MXJ, CUS and UCN markets will be made on 24 December 2019 and 31 December 2019 respectively. These intra-day variation adjustments will be calculated based on open positions existing in the above-mentioned markets at around 12:00 noon on 24 December 2019 and 31 December 2019 respectively. You are required to ensure completion of payments within one hour after receiving notification of details on the variation adjustment requirements, if any.
Please note that the temporary increase in the margin levels will generally increase the margin requirements for contracts in the above-mentioned markets as at the close of 23 December 2019. While the degree of increase may vary from portfolio to portfolio, the impact on the margin requirements could be greater for certain index options series, especially those out-the-money series which are most sensitive to an increase in the underlying futures’ margin levels. To assist Participants in assessing the potential margin impacts, the Clearing House will make available a simulated Risk Parameter File (“RPF”) on 18 December 2019 for Participants’ margin estimation purpose. Detailed arrangement will also be included in the margin circular to be released on 18 December 2019.
Please ensure that your staffs are fully aware of both the temporary increase in the margin levels and the mandatory intra-day variation adjustments and make necessary arrangement with your designated bank. You are also strongly advised to give advanced notice to your clients regarding these arrangements where appropriate and ensure that adequate margin deposits from your clients are maintained during the holiday period.
Despite the mandatory intra-day variation adjustments mentioned above, the Clearing House may make additional intra-day variation adjustments on 24 December 2019 and 31 December 2019, respectively, should market conditions warrant.
The Clearing House considers it appropriate to remind you the importance of having proper arrangement in place before and after the holiday period as those days are normal settlement days. In case of any key staffs on vacation before and after the holiday period, please ensure your backup staffs are familiar with the operational and monitoring procedures to adequately monitor your exposure and fulfill the payment obligations to the Clearing House on time. Any failure in meeting the settlement timelines is an event of default under HKCC Rule 509. Please refer to the circular issued on 30 July 2019 (Ref: CD/CDCRM/124/2019) for more details on the payment obligations of the Participant and the consequence of the delay or failure in meeting the obligations.
