Download Contract Specifications for Option Contract on EURUSD

Annexure 4 – Detailed Contract Specifications of Currency Options
Contract Specifications for Option Contract on EURUSD
1.1 Underlying
Euro - US Dollar spot rate (EURUSD)
Symbol - EURUSD
1.2 Instrument Type
OPTCUR
1.3 Option Type
Premium Style European Call and Put Options
1.4 Trading Hours
Monday to Friday:
Session 1 - 04:30 Hours to 17:00 Hours
Session 2 - 17:05 Hours to 02.30 Hours
1.5 Size of the Contract
12500 Euro
1.6 Quotation
U.S. dollars per EURO, quoted up to the forth decimal place (e.g. 1.0900 – 1.0901)
1.7 Premium
Premium quoted in USD
1.8 Minimum Price Movement (Tick Size)
USD 0.0001 (Tick Value – 1.25 US)
1.9 Strike Price Intervals
$ 0.0050
At all times there will be a minimum of 3 in-the-money, 1 at-the-money and 3 out-of-money
options available.
Once the settlement price reaches close to the lower end or higher end of the option chain,
additional option strikes will be introduced.
1
1.10 Contract Months
Three (3) serial monthly contracts followed by three (3) quarterly contracts of the cycle March /
June / September / December.
1.11 Settlement Mechanism
The contracts would be settled in cash in US Dollar (US $).
1.12 Contract Value
The contract value shall be = (Strike price + Premium)* 12500 USD
1.13 Daily Settlement Price
The daily settlement price of EURUSD Option contracts shall be the last half an hour volume
weighted average price of the contract.
In the absence of last half an hour trading, volume weighted average futures price of trades in
the entire day, subject to a minimum of 5 trades in the day will be taken for the computation.
1.14 Last Trading Day
The last trading day for the futures contract would be two working days prior to the last working
day of the expiry at 12:30 p.m. If the last trading day is a trading holiday, then last trading day
shall be the previous trading day.
1.15 Settlement
Daily Settlement: The daily contracts for each session would be settled as follows:
Trading Session 1 - 04:30 Hours to 17:00 Hours – Settlement on next working day by 08.00
Hours
Trading Session 2 - 17:05 Hours to 02.30 Hours – Settlement on the same day by 16:30 Hours
Final Settlement:
Along with daily settlement cycle for the respective contracts.
1.16 Final Settlement Price
The final settlement price of the EURUSD contracts shall be computed using the RBI reference
rate for USDINR and EURINR on the last trading day of the contract.
Computed RBI Reference Rate for EURUSD = (RBI Reference Rate for EURINR/ RBI
Reference Rate for USDINR)
1.17 Applicable Position Limits for Futures & Options Contract
Eligible market participants are allowed to take positions in EURUSD contracts as prescribed
below:
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a) Position limits for Trading Members (positions on proprietary basis as well
as clients’ position), Institutional Investors and Foreign Portfolio Investors
Gross open position across all contracts not to exceed 15% of the total open interest or
USD 1 billion equivalent, whichever is higher.
b) Position limits for other clients
Gross open position across all contracts not to exceed 6% of the total open interest or
USD 100 million equivalent, whichever is higher
1.18 Price Bands
A contract specific price range based on its delta value computed and updated on daily basis.
1.19 Risk Management
The margins shall be collected in USD.
Initial Margin
Initial Margin would be calculated using SPAN; the margining framework of India ICC shall
be compliant with the PFMI including a margin model that provides coverage of at least a 99%
single-tailed confidence interval of the estimated distribution of future exposure. India ICC
shall conduct daily stress testing, back testing and reverse stress testing for credit risk to
ascertain the impact of failures of members and adequacy of its financial resources in meeting
any shortfall arising out of such failures.
Exposure Margin
The clearing corporation may impose an exposure margin to provide additional risk coverage.
The exposure margin shall be deducted from the liquid assets of the clearing member on an
online, real time basis.
Real-Time Computation
The computation of worst scenario loss would have two components. The first is the valuation
of the portfolio under the various scenarios of price changes. At the second stage, these scenario
contract values would be applied to the actual portfolio positions to compute the portfolio
values and the initial margin. The scenario contract values shall be updated at the start of the
business day, then every 1.5 hours and finally at the end of the business day. The latest available
scenario contract values would be applied to member/client portfolios on a real time basis.
Calendar Spread Margins
A futures position at one expiry month which is hedged by an offsetting position at a different
maturity would be treated as a calendar spread. The benefit for a calendar spread would
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continue till expiry of the near month contract. The calendar spread margin shall be deducted
from the liquid net worth of the clearing member on an online, real time basis.
The margin for options calendar spread would be the same as specified for futures calendar
spread. The margin would be calculated on the basis of delta Δ of the portfolio in each month.
A portfolio consisting of a near month option with a delta Δ of 100 and a far month option with
a delta Δ of –100 would bear a spread charge equal to the spread charge for a portfolio which
is long 100 near month futures and short 100 far month futures.
Short Option Minimum Margin
Deep-out-of-the-money short options may show zero or minimal Scan Risk given the price and
volatility moves in the 16 market scenarios, yet still present risk in the event that these options
move closer-to-the-money or in-the-money, thereby generating potentially large losses. Hence
a Short Option Minimum Margin is applied to each product to account for this potential
exposure. The Short Option Minimum Margin is calculated on the Notional Value of all short
options.
Mark-to-Market (MTM) Settlement
The MTM settlement shall be done at least twice in a business day, at settlement times as
specified by the clearing corporation from time to time.
Net Option Value
The Net Option Value is the current market value of the option times the number of options
(positive for long options and negative for short options) in the portfolio. The Net Option Value
would be added to the Liquid Net Worth of the clearing member. Thus, mark to market gains
and losses would not be settled in cash for options positions.
Settlement of Premium
Premium would be settled in USD and would be paid in by the buyer in cash and paid out to
the seller in cash. Until the buyer pays in the premium, the premium due shall be deducted from
the available liquid assets on a real time basis.
Assignment Margin
Assignment Margin shall be levied on assigned positions of the clearing members towards
exercise settlement obligations for option contracts. For option positions exercised, the seller
of the options shall be levied assignment margins which shall be 100% of the net exercise
settlement value payable by a clearing member towards exercise settlement. Assignment
margin shall be levied till the completion of pay-in towards the exercise settlement. Assignment
margins shall be computed as net of assignment settlement and futures final settlement.
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Contract Specifications for Option Contract on GBPUSD
1.1 Underlying
Sterling - US Dollar spot rate (GBPUSD)
Symbol - GBPUSD
1.2 Instrument Type
OPTCUR
1.3 Option Type
Premium Style European Call and Put Options
1.4 Trading Hours
Monday to Friday:
Session 1 - 04:30 Hours to 17:00 Hours
Session 2 - 17:05 Hours to 02.30 Hours
1.5 Size of the Contract
6250 GBP
1.6 Quotation
U.S. dollars per GBP, quoted up to the forth decimal place (e.g. 1.2900 – 1.2901)
1.7 Premium
Premium quoted in USD
1.8 Minimum Price Movement (Tick Size)
USD 0.0001 (Tick Value –0.1 US)
1.9 Strike Price Intervals
$ 0.0050
At all times there will be a minimum of 3 in-the-money, 1 at-the-money and 3 out-of-money
options available.
Once the settlement price reaches close to the lower end or higher end of the option chain,
additional option strikes will be introduced.
5
1.10 Contract Months
Three (3) serial monthly contracts followed by three (3) quarterly contracts of the cycle March /
June / September / December.
1.11 Settlement Mechanism
The contracts would be settled in cash in US Dollar (US $).
1.12 Contract Value
The contract value shall be = (Strike price + Premium)* 6250 USD
1.14 Daily Settlement Price
The daily settlement price of GBPUSD Option contracts shall be the last half an hour volume
weighted average price of the contract.
In the absence of last half an hour trading, volume weighted average futures price of trades in
the entire day, subject to a minimum of 5 trades in the day will be taken for the computation.
1.14 Last Trading Day
The last trading day for the futures contract would be two working days prior to the last working
day of the expiry month at 12:30 p.m. If the last trading day is a trading holiday, then last
trading day shall be the previous trading day.
1.15 Settlement
Daily Settlement: The daily contracts for each session would be settled as follows:
Trading Session 1 - 04:30 Hours to 17:00 Hours – Settlement on next working day by 08.00
Hours
Trading Session 2 - 17:05 Hours to 02.30 Hours – Settlement on the same day by 16:30 Hours
Final Settlement:
Along with daily settlement cycle for the respective contracts.
1.16 Final Settlement Price
The final settlement price of the GBPUSD contracts shall be computed using the RBI reference
rate for USDINR and GBPINR on the last trading day of the contract.
Computed RBI Reference Rate for GBPUSD = (RBI Reference Rate for GBPINR/ RBI
Reference Rate for USDINR)
1.17 Applicable Position Limits for Futures & Options Contract
Eligible market participants are allowed to take positions in GBPUSD contracts as prescribed
below:
6
a) Position limits for Trading Members (positions on proprietary basis as well
as clients’ position), Institutional Investors and Foreign Portfolio Investors
Gross open position across all contracts not to exceed 15% of the total open interest or
USD 1 billion equivalent, whichever is higher.
b) Position limits for other clients
Gross open position across all contracts not to exceed 6% of the total open interest or
USD 100 million equivalent, whichever is higher
1.18 Price Bands
A contract specific price range based on its delta value computed and updated on daily basis.
1.19 Risk Management
The margins shall be collected in USD.
Initial Margin
Initial Margin would be calculated using SPAN; the margining framework of India ICC shall
be compliant with the PFMI including a margin model that provides coverage of at least a 99%
single-tailed confidence interval of the estimated distribution of future exposure. India ICC
shall conduct daily stress testing, back testing and reverse stress testing for credit risk to
ascertain the impact of failures of members and adequacy of its financial resources in meeting
any shortfall arising out of such failures.
Exposure Margin
The clearing corporation may impose an exposure margin to provide additional risk coverage.
The exposure margin shall be deducted from the liquid assets of the clearing member on an
online, real time basis.
Real-Time Computation
The computation of worst scenario loss would have two components. The first is the valuation
of the portfolio under the various scenarios of price changes. At the second stage, these scenario
contract values would be applied to the actual portfolio positions to compute the portfolio
values and the initial margin. The scenario contract values shall be updated at the start of the
business day, then every 1.5 hours and finally at the end of the business day. The latest available
scenario contract values would be applied to member/client portfolios on a real time basis.
Calendar Spread Margins
A futures position at one expiry month which is hedged by an offsetting position at a different
maturity would be treated as a calendar spread. The benefit for a calendar spread would
7
continue till expiry of the near month contract. The calendar spread margin shall be deducted
from the liquid net worth of the clearing member on an online, real time basis.
The margin for options calendar spread would be the same as specified for futures calendar
spread. The margin would be calculated on the basis of delta Δ of the portfolio in each month.
A portfolio consisting of a near month option with a delta Δ of 100 and a far month option with
a delta Δ of –100 would bear a spread charge equal to the spread charge for a portfolio which
is long 100 near month futures and short 100 far month futures.
Short Option Minimum Margin
Deep-out-of-the-money short options may show zero or minimal Scan Risk given the price and
volatility moves in the 16 market scenarios, yet still present risk in the event that these options
move closer-to-the-money or in-the-money, thereby generating potentially large losses. Hence
a Short Option Minimum Margin is applied to each product to account for this potential
exposure. The Short Option Minimum Margin is calculated on the Notional Value of all short
options.
Mark-to-Market (MTM) Settlement
The MTM settlement shall be done at least twice in a business day, at settlement times as
specified by the clearing corporation from time to time.
Net Option Value
The Net Option Value is the current market value of the option times the number of options
(positive for long options and negative for short options) in the portfolio. The Net Option Value
would be added to the Liquid Net Worth of the clearing member. Thus, mark to market gains
and losses would not be settled in cash for options positions.
Settlement of Premium
Premium would be settled in $US and would be paid in by the buyer in cash and paid out to
the seller in cash. Until the buyer pays in the premium, the premium due shall be deducted from
the available liquid assets on a real time basis.
Assignment Margin
Assignment Margin shall be levied on assigned positions of the clearing members towards
exercise settlement obligations for option contracts. For option positions exercised, the seller
of the options shall be levied assignment margins which shall be 100% of the net exercise
settlement value payable by a clearing member towards exercise settlement. Assignment
margin shall be levied till the completion of pay-in towards the exercise settlement. Assignment
margins shall be computed as net of assignment settlement and futures final settlement.
8
Contract Specifications for Option Contract on JPYUSD
1.1 Underlying
Japanese Yen - US Dollar Spot Rate (JPYUSD)
Symbol - JPYUSD
1.2 Instrument Type
OPTCUR
1.3 Option Type
Premium Style European Call and Put Options
1.4 Trading Hours
Monday to Friday:
Session 1 - 04:30 Hours to 17:00 Hours
Session 2 - 17:05 Hours to 02.30 Hours
1.5 Size of the Contract
JPY 1,000,000
1.6 Quotation
US Cents per 100 Japanese Yen upto two decimal (e.g. 89.23 – 89.24) or US$ 0.000001 per ¥
1.7 Premium
Premium quoted in US$ Cents
1.8 Minimum Price Movement (Tick Size)
0.01 (Value - US$ 1)
1.9 Strike Price Intervals
$ 0.25
At all times there will be a minimum of 3 in-the-money, 1 at-the-money and 3 out-of-money
options available.
Once the settlement price reaches close to the lower end or higher end of the option chain,
additional option strikes will be introduced.
9
1.10 Contract Months
Three (3) serial monthly contracts followed by three (3) quarterly contracts of the cycle March /
June / September / December.
1.11Settlement Mechanism
The contracts would be settled in cash in US Dollar (US $).
1.12 Contract Value
The contract value shall be = (Quoted Price*1000000)/10000 USD
1.15Daily Settlement Price
The daily settlement price of JPYUSD Option contracts shall be the last half an hour volume
weighted average price of the contract.
In the absence of last half an hour trading, volume weighted average futures price of trades in
the entire day, subject to a minimum of 5 trades in the day will be taken for the computation.
1.14Last Trading Day
The last trading day for the futures contract would be two working days prior to the last working
day of the expiry month at 12:30 p.m. If the last trading day is a trading holiday, then last
trading day shall be the previous trading day.
1.15Settlement
Daily Settlement: The daily contracts for each session would be settled as follows:
Trading Session 1 - 04:30 Hours to 17:00 Hours – Settlement on next working day by 08.00
Hours
Trading Session 2 - 17:05 Hours to 02.30 Hours – Settlement on the same day by 16:30 Hours
Final Settlement:
Along with daily settlement cycle for the respective contracts.
1.16Final Settlement Price
The final settlement price of the JPYUSD contracts shall be computed using the RBI reference
rate for JPYINR and USDINR on the last trading day of the contract.
Computed RBI Reference Rate for JPYUSD = (RBI Reference Rate for JPYINR/ RBI
Reference Rate for USDINR)*100
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1.17 Applicable Position Limits for Futures & Options Contract
Eligible market participants are allowed to take positions in JPYUSD contracts as prescribed
below:
a) Position limits for Trading Members (positions on proprietary basis as well
as clients’ position), Institutional Investors and Foreign Portfolio Investors
Gross open position across all contracts not to exceed 15% of the total open interest or
USD 1 billion equivalent, whichever is higher.
b) Position limits for other clients
Gross open position across all contracts not to exceed 6% of the total open interest or
USD 100 million equivalent, whichever is higher
1.18 Price Bands
A contract specific price range based on its delta value computed and updated on daily basis.
1.19 Risk Management
The margins shall be collected in USD.
Initial Margin
Initial Margin would be calculated using SPAN; the margining framework of India ICC shall
be compliant with the PFMI including a margin model that provides coverage of at least a 99%
single-tailed confidence interval of the estimated distribution of future exposure. India ICC
shall conduct daily stress testing, back testing and reverse stress testing for credit risk to
ascertain the impact of failures of members and adequacy of its financial resources in meeting
any shortfall arising out of such failures.
Exposure Margin
The clearing corporation may impose an exposure margin to provide additional risk coverage.
The exposure margin shall be deducted from the liquid assets of the clearing member on an
online, real time basis.
Real-Time Computation
The computation of worst scenario loss would have two components. The first is the valuation
of the portfolio under the various scenarios of price changes. At the second stage, these scenario
contract values would be applied to the actual portfolio positions to compute the portfolio
values and the initial margin. The scenario contract values shall be updated at the start of the
business day, then every 1.5 hours and finally at the end of the business day. The latest available
scenario contract values would be applied to member/client portfolios on a real time basis.
11
Calendar Spread Margins
A futures position at one expiry month which is hedged by an offsetting position at a different
maturity would be treated as a calendar spread. The benefit for a calendar spread would
continue till expiry of the near month contract. The calendar spread margin shall be deducted
from the liquid net worth of the clearing member on an online, real time basis.
The margin for options calendar spread would be the same as specified for futures calendar
spread. The margin would be calculated on the basis of delta Δ of the portfolio in each month.
A portfolio consisting of a near month option with a delta Δ of 100 and a far month option with
a delta Δ of –100 would bear a spread charge equal to the spread charge for a portfolio which
is long 100 near month futures and short 100 far month futures.
Short Option Minimum Margin
Deep-out-of-the-money short options may show zero or minimal Scan Risk given the price and
volatility moves in the 16 market scenarios, yet still present risk in the event that these options
move closer-to-the-money or in-the-money, thereby generating potentially large losses. Hence
a Short Option Minimum Margin is applied to each product to account for this potential
exposure. The Short Option Minimum Margin is calculated on the Notional Value of all short
options.
Mark-to-Market (MTM) Settlement
The MTM settlement shall be done at least twice in a business day, at settlement times as
specified by the clearing corporation from time to time.
Net Option Value
The Net Option Value is the current market value of the option times the number of options
(positive for long options and negative for short options) in the portfolio. The Net Option Value
would be added to the Liquid Net Worth of the clearing member. Thus, mark to market gains
and losses would not be settled in cash for options positions.
Settlement of Premium
Premium would be settled in $US and would be paid in by the buyer in cash and paid out to
the seller in cash. Until the buyer pays in the premium, the premium due shall be deducted from
the available liquid assets on a real time basis.
Assignment Margin
Assignment Margin shall be levied on assigned positions of the clearing members towards
exercise settlement obligations for option contracts. For option positions exercised, the seller
of the options shall be levied assignment margins which shall be 100% of the net exercise
12
settlement value payable by a clearing member towards exercise settlement. Assignment
margin shall be levied till the completion of pay-in towards the exercise settlement. Assignment
margins shall be computed as net of assignment settlement and futures final settlement.
13