In its role as a Clearing House, Indonesia Clearing House (ICH) ensures the financial performance of every cleared trade. To maintain the integrity of the clearing system, ICH has well-established risk management systems to monitor and measure the risk exposures of its members.

The risk management framework employed ICH includes stress-testing to determine capital adequacy of the clearing fund, position limits on individual customer group to prevent excessive concentration risk, and responsive margining and collateralisation processes.

Margins represent assets held as collateral against the possibility of a clearing member defaulting on any financial obligation relating to its open derivative contracts.

To achieve a balance between robustness and efficiency, margin reviews are conducted on a regular basis. In addition, during adverse market conditions or whenever the situation warrants, margin reviews will be performed more frequently to ensure sufficient collateralisation of trades.

In accordance with the Futures Trading Act, each Clearing Member is required to keep customer collateral deposits segregated from its own.

ICH maintains a two-level system (Maintenance Margin and Initial Margin) in prescribing minimum margin requirements for clearing members and customers.

Maintenance Margin represents the minimum collateral deposit that ICH requires from clearing members while Initial Margin represents the minimum collateral deposit that clearing members require from their customers for newly entered positions.

Clearing members are only obligated to collect additional margins from a customer if the margin-on-deposit falls below the level of Maintenance Margin. When this happens, a margin call is issued to the customer and margin must be brought back to the level of Initial Margin.

ICH margining methodology has been tested extensively and proven to be adequate throughout financial crises.

Margin model seeks to cover each product’s estimated distribution of future exposure in pre-specified liquidation period at the 99% confidence level.

The Clearing Waterfall is a layered risk management mechanism implemented by the Clearing House to manage and absorb financial losses arising from a default by a Clearing Member. This mechanism is designed to ensure that any losses are addressed in a structured, transparent, and orderly manner, while safeguarding the stability and continuity of the clearing system.

In the event of a default by a Clearing Member, the Clearing House will first utilize the financial resources provided by the defaulting Clearing Member, including margin collateral and its contribution to the Default Fund. If these resources are insufficient to cover the resulting losses, the Clearing House will subsequently activate the next layers of protection in accordance with the predetermined waterfall structure.