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Repo with the CCP (Risk Management System)

Repo with the CCP (Risk Management System). December 04, 2012 Moscow. Sergey Gorbachenko Head of Clearing CJSC JSCB National Clearing Centre. Main Principles of the Risk Management System.

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Repo with the CCP (Risk Management System)

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  1. Repo with the CCP (Risk Management System) December 04, 2012 Moscow Sergey Gorbachenko Head of ClearingCJSC JSCB National Clearing Centre

  2. Main Principles of the Risk Management System • Collateral needed to cover a Clearing member’s positions (the Single limit) is estimated based on the online evaluation of market and interest rate risks as well as marking to market of such positions. • The worst alternative, i.e. that one with the lowest level of position coverage is chosen taking into account entered orders. • Assessment ranges for market and interest rate risks for each security is computed based on historical simulation with exponential weighting. • In order to consider the concentration risk 3 levels of market and interest rate risks corresponding with increased collateral requirement for increasing position are applied. 2

  3. Concentration limits Collateral requirement Standard level Increased level Prohibitive level Limit 1 Limit 2 Position size • Concentration limits: • applied to consider the concentration risk associated with positions. • are determined for market and interest rate risks (3 levels). 3

  4. Risk parameters Repo trade price Term • Risk parameters: • the calculated price (of shares and bonds that involved into trades with partial collateral): • for shares – closing price on the spot market; • for bonds – the comparative method (static Z-spread). • the calculated repo rate (the weighted average repo rate or the Repo rate indicator). • Market risk rate and interest risk rate (method of adaptive rates with predefined level for confidence probability and estimation horizon). • Upper and Lower limits of the Assessment range for market and interest rate risks (using the relevant Risk Rates). One day Calculated repo rate risk Lower Limit Security price Upper Limit Calculated price 4

  5. Time Table for the Risk Parameters Calculation Number of changes is restricted as per the FFMS’s regulatory act (concerning trading suspension Possible change in risk parameters Price Upper Limit Upper Limit After hours trading Global markets News Calculated Price Calculated price Lower Limit Lower Limit Time 10:00 19:00 23:50 10:00 Calculation of risk parameters for the next day 5

  6. Time Table for the Risk Parameters Calculation Calculation of risk parameters for the next day Changes in risk parameters are possible (reduction of collateral requirements) Public Holiday in the Russian Federation Monday Thursday Friday Tuesday Wednesday Time 10:00 10:00 10:00 10:00 10:00 6

  7. Life Circle of a Trade Trading day on 21.11.12 Security’s risk parameters: Parameters of the trade: Settlement date:T+2 (23.11.12) Direction: sell Number of securities: 10 Price:RUB10 per security Interest rate risk and the concentration limits are not included in calculation of collateral (the Single limit) in this example for clarity Clearing member’s positions after the trade: 7

  8. Life Circle of a Trade Trading day on 22.11.12 (10:00) Security’s risk parameters: The Single limit of the Clearing member is< 0. Collateral is insufficient. At 10:00 the Margin call containing the demand to recover position coverage by 17:30 is send to the Clearing member. Clearing member’s positions: 8

  9. Life Circle of a Trade Trading day on 22.11.12 (17:30) Security’s risk parameters: Parameters of the trade to be closed out mandatory: Settlement date:T+2 (24.11.12) Direction: buy Number of securities: 5 Price: 12 RUB/security The Margin call has not been executed by the Clearing member. Market risk associated with the Clearing member’s positions are to be satisfied mandatory. After the mandatory satisfaction the Single limit is >0 and collateral is sufficient. Clearing member’s positions after the trade: 9

  10. Life Circle of a Trade Trading day on 23.11.12 (17:00) Security’s risk parameters: Repo trade parameters: Term: one day Direction: buy/sell Number of securities: 10 Haircut: RUB2, Price: -0.2 RUB/security There is an insufficient amount of assets for settling matured trade (there is a shortage of securities). A repo trade under which the obligations are rolled over to the next day should be executed with the Clearing member. Clearing member’s positions after the trade: 10

  11. Life Circle of a Trade Trading day on 23.11.12 (17:00) Security’s risk parameters: The obligations termination procedure resulted in that RUB10 were credited to the cash account of the Clearing member, as: on 21.11.12 it sold 10 securities for RUB10 each, on 23.11.12 it bought 10 securities for RUB9 each. Clearing member’s position: 11

  12. Life Circle of a Trade Trading day on 24.11.12 (10:00) Security’s risk parameters: The Clearing member transferred 5 securities to the Collateral section Clearing member’s position: 12

  13. Life Circle of a Trade Trading day on 24.11.12 (17:00) Security’s risk parameters: The obligations termination procedure resulted in that 5 securities were debited from the Collateral section of the Clearing member while RUB28 were credited to its cash account. Clearing member’s position: 13

  14. Zero Coupon Yield Curve Zero Coupon Yield Curve Base, effective from 17.09.2012 Zero Coupon Yield Curve ZCYC The Zero Coupon Yield Curve (G-curve) calculated by the Moscow Exchange is determined on the basis of trades in government bonds. It used as a benchmark for risk-free borrowing costs on the Russian debt market. The G-curve is a continuous representation of interest rates against a term that is applied to set prices for debt instruments and manage interest rate risks. The G-curve is computed on a real time continuous basis during the trading sessions as trades in bonds included into the curve’s base are executed. 14

  15. Disclaimer • This presentation has been prepared and issued by OpenJointStockCompany“MoscowExchange MICEX-RTS”(the “Company”). Unless otherwise stated, the Company is the source for all data contained in this document. Such data is provided as at the date of this document and is subject to change without notice. • This document does not constitute or form part of, and should not be construed as, an offer or invitation for the sale or subscription of, or a solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any offer, contract, commitment or investment decision relating thereto, nor does it constitute a recommendation regarding the securities of the Company. • The information in this document has not been independently verified. No representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy or completeness of the information or opinions contained herein. None of the Company, or any of its subsidiaries or affiliates or any of such person's directors, officers or employees, advisers or other representatives, accepts any liability whatsoever (whether in negligence or otherwise) arising, directly or indirectly, from the use of this document or otherwise arising in connection therewith. • This presentation includes forward-looking statements. All statements other than statements of historical fact included in this presentation, including, without limitation, those regarding our financial position, business strategy, management plans and objectives for future operations are forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance, achievements or industry results to be materially different from those expressed or implied by these forward-looking statements. These forward-looking statements are based on numerous assumptions regarding our present and future business strategies and the environment in which we expect to operate in the future. Important factors that could cause our actual results, performance, achievements or industry results to differ materially from those in the forward-looking statements include, among other factors: • perception of market services offered by the Company and its subsidiaries; • volatility (a) of the Russian economy and the securities market and (b) sectors with a high level of competition that the Company and its subsidiaries operate; • changes in (a) domestic and international legislation and tax regulation and (b) state policies related to financial markets and securities markets; • competition increase from new players on the Russian market; • the ability to keep pace with rapid changes in science and technology environment, including the ability to use advanced features that are popular with the Company's and its subsidiaries' customers; • the ability to maintain continuity of the process of introduction of new competitive products and services, while keeping the competitiveness; • the ability to attract new customers on the domestic market and in foreign jurisdictions; • the ability to increase the offer of products in foreign jurisdictions. • Forward-looking statements speak only as of the date of this presentation and we expressly disclaim any obligation or undertaking to release any update of, or revisions to, any forward-looking statements in this presentation as a result of any change in our expectations or any change in events, conditions or circumstances on which these forward-looking statements are based. 15

  16. THANK YOU FOR YOUR INTEREST IN MOSCOW EXCHANGE! Contact:Phone: +7 (495) 363-32-32, ext. 11-94 Email: Gorbachenko@micex.com Website: http://www.nkcbank.com/

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