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Risk Management

The Margining system is a fundamental risk management tool adopted by Euronext Clearing.

Each member must pay Margins to cover the theoretical costs of liquidation, which Euronext Clearing would incur in the event of a Member’s default in order to close the open position.

Calculation of margins

Margins are calculated using efficient, reliable and accurate systems: the FIRE (Fixed Income Risk Engine) methodology for Italian, Spanish, Irish and Portuguese Bonds, the MVP methodology (Method for Porfolio Valuation) for corporate Bonds and bonds issued by different countries from the above-mentioned, the MARS methodology (Margining System) for Equity Derivatives products and for equity cash products, the MMEL methodology (Margins for Electricity Market) for Energy Derivatives and the MMeG methodology (Margins for Wheat Market) for Wheat Derivatives


Fire (Fixed Income Risk Engine) is a VaR based methodology relying on the portfolio’s cashflow mapping on the sovereign reference curve’s tenors. The adopted risk measure is a mid-vol scaled Expected Shortfall floored with an unscaled Expected Shortfall. A set of risk addons are also applied to capture other peculiar behaviors, such as idiosyncratic and concentration. 

MVP determines the overall risk exposure for integrated portfolios by grouping into five classes of corporate bonds according to their time to expiry.

A single initial margin is then computed considering the FIRE additional margins, the MVP additional margins and the mar-to-market margins. 

Equity Derivatives and Cash Equity

MARS is an integrated and coordinated methodology capable of recognizing the overall risk in a portfolio and allowing for the offsetting of risk between closely correlated products, as well as cross-margining between derivatives and equity cash products in the portfolio.

The integration of MARS allows to determine the overall risk exposure for Integrated Portfolios of products with significant price correlation, grouped by:

  • Product Group: Integrated Portfolio of underlying assets with statistically significant price trend correlation;
  • Class Group: Integrated Portfolio of cash and derivatives instruments related to the same underlying stock.

In order to benefit from cross-margining on integrated equities cash-derivates portfolios, Members must be General or Individual Clearing Members of both sections, or, if Non-Clearing Members, must use the same General Clearing Member for both sections.

Energy Derivatives

Derivatives contracts traded on IDEX form an Integrated Portfolio considered as a whole for the purpose of Initial Margins calculation. The MMeL margining methodology has a structure of Classes  including all the contracts of the same type (futures or options), with the same underlying (PUN) and the same characteristics (Delivery Period and type of supply: Baseload, Peakload).

Agricultural Commodities

Derivatives contracts traded on AGREX are aggregated in Integrated Portfolios, evaluated unitarily and consequently subjected to an aggregated calculation of Initial Margins. The MMeG Margining methodology envisages a Class structure capable of classifying the contracts which are actually traded on the market plus additional Classes for managing Delivery Positions Covered and Uncovered and Matched Positions.


Aim of Initial Margin

Initial Margin is called on a daily basis to cover the theoretical costs of liquidation, which Euronext Clearing would incur in the event of a Member’s default, in order to close the open positions in the worst possible market scenario

Intraday Margin

Intraday margins are called by Euronext Clearing in case of sudden sharp price variations or in the case of a Member’s excessive overall risk exposure. Intraday Margin is calculated with the same methodology as the Initial Margin


Initial Margins can be placed in cash (Euro) or in Euro denominated Government Bonds, traded on MTS markets and issued by low credit and market risk Countries. BTPItalia (Italian Governement Bond linked to italian inflation) traded on markets other than MTS are also accepted. Government bonds are marked to market daily, using prices or quotations made available by info providers. The bonds deposited as collateral are grouped in classes of haircut based on their duration. Intraday Margins can be placed in cash (Euro) or in Euro denominated Government Bonds, traded on MTS markets and issued by low credit and market risk Countries. Collateral value posted in securities used to cover Initial Margins is determined on the basis of concentration limits.

Default Fund

Four Default Funds, one on the Equities and Derivatives Sections, one on the Energy Derivatives Section, one on the Commodities Agricole Section and the other one on the Bonds Section, are managed by Euronext Clearing as an additional protection aimed at covering risks associated with sharp price/interest rate movements.

The Default Fund amounts are calculated as a result of periodic stress tests. The contribution to the Default Fund of each Direct Member is adjusted at least on a monthly basis proportionally to the average Initial Margin paid in the previous month.

The default Fund contribution quota must be deposited in cash (Euro).

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