“trading and settlement process for interest rate …...• ceiling /floor within + 1.25% of...
TRANSCRIPT
“Trading and Settlement Process for Interest Rate Futures in TFEX”
Outline
Get to Known by Tanavatt BhanijkasemKnow about TFEXInterest Rate Futures Contract Specification Contract Specification
Derivative Back Office Operation Process by Rungrat SriniratsaiTrade & Settlement FlowProcess Flow• Account Opening• Settlement and MTM
Report List
The Thailand Futures Exchange Plc (TFEX), A subsidiary of The Stock Exchange of Thailand (SET), was established on May 17, 2004 as a derivatives exchange. The TFEX is governed by the Derivatives Act B.E. 2546 (2003) and is under the supervision of the Securities and Exchange Commission (SEC).
Products in TFEXApril 28, 2006 Launch SET50 Index Futures as the first product October 29, 2007 Launch SET50 Index Options as the second product November 24, 2008 Launch Stock Futures February 2, 2009 Launch 50 Baht Gold Futures August 2, 2010 Launch 10 Baht Gold FuturesOctober 18, 2010 Launch Interest Rate Futures
Know about TFEX
Trading Mechanism
Broker A
Clearing A Clearing B
Broker B
Clearing House
ExchangeAutomatic
Matching Order
Buyer Seller
Clearing House : Guarantee & Cancel Position
Order/Confirm Order/Confirm
Inform to Split Contract
EOD:Settlement Price
Margin Margin
Margin Margin
Trading in TFEX
Trading in TFEX
Trading ProcessOpen the accountOpen position
Send “Long” or “Short” order
Deposit Margin (Collateral)Mark to MarketMonitor Margin• Initial Margin• Maintenance Margin
Close positionSend “Short” or “Long” orderHold to Maturities
Interest Rate Futures Contract Specification
•10,000,000 BahtContract Size
• Calculate from Interest rate 6M THBFIX which announce by Reuters at 11.00 am of the last trading day . By using 4 decimal digits
Final Settlement Price
• The 3rd Wednesday of the contract month. On that day the new series will be generated.• Time at which trading ceases on Last trading day is 11.00 a.m.
Last Trading Day
•Cash SettlementSettlement Method
•From 500 contracts net long or short in any contract month or all contract month combined.Large Position Report
•Net 20,000 contracts on one side of the market in any contract month or all contract month combined.Position Limit
•March (H), June (M), September (U), December (Z) up to 4 quartersContract month listed / Series
•Pre – open 9:15 a.m. – 9:45 a.m.Morning session 9:45 a.m. – 12:30 p.m.Pre – open 14:00 p.m. – 14:30 p.m.Afternoon session 14:30 p.m. – 16:00 p.m. ( Others TFEX products Market close at 16.55 p.m.)
Trading Hours
• Ceiling /Floor within + 1.25% of previous day settlement price (circuit breaker) • After trading resumes, Ceiling /Floor will be expanded to + 2.50 % of previous day settlement price
Price limit
•0.005 point (Equivalent to 250 Baht per Contract)Minimum Tick Size
•Quotations in terms of index 100.000 – Yield (3 decimal points)Price Quotation
•Interest Rate THBFIX 6 monthUnderlying Index
5 Y Government Bond Futures Contract Specification
2 nearest quarter months on March (H), June (M), September (U), December (Z) cycleSettlement Month
•1,000,000 BahtContract Size
• Based on basket of eligible bond – A designated of Government Bonds with a minimum issuance size of B5,000 Billion and 4-6 year term to maturity on the first calendar day of the contract month. •Calculate from average yield quoted by primary dealers. By using 4 decimal digits
Final Settlement Price
The 3rd Wednesday of the contract month. On that day the new series will be generated.• Time at which trading ceases on Last trading day is 16.00 a.m.
Last Trading Day
•Cash SettlementSettlement Method
•From 500 contracts net long or short in any contract month or all contract month combined.Large Position Report
•Net 20,000 contracts on one side of the market in any contract month or all contract month combined.Position Limit
•March (H), June (M), September (U), December (Z) up to 4 quartersContract month listed / Series
•Pre – open 9:15 a.m. – 9:45 a.m.Morning session 9:45 a.m. – 12:30 p.m.Pre – open 14:00 p.m. – 14:30 p.m.Afternoon session 14:30 p.m. – 16:00 p.m. ( Others TFEX products Market close at 16.55 p.m.)
Trading Hours
• Ceiling /Floor within + 2. 50% of previous day settlement price (circuit breaker) • After trading resumes, Ceiling /Floor will be expanded to +5.00% of previous day settlement price
Price limit
•0.01 point (Equivalent to 100 Baht per Contract)Minimum Tick Size
•Price quoted by percent of Par value with 2 decimal pointsPrice Quotation
•5-Year Thai Government Bond with 5% CouponUnderlying Index
Trading Symbol
11 : Year 201110 : Year 2010Last 2 characters, 6th and 7th represents year
TGB : 5Y Government Bond Futures
TBF6 :6M THBFIX Futures
The first 4 characters represents Underlying
TBF6Z10 : 6 M THBFIX Futures which expires on December 2010TGB5H11 : 5 Year Government Bond Futures which expires on March 2011
The 5th character represent the contract month
DecemberZ
NovemberX
OctoberV
SeptemberU
AugustQ
JulyN
JuneM
MayK
AprilJ
MarchH
FebruaryG
JanuaryF
MonthCode
Symbol UUUU M YY
TBF6Z10 : 6 M THBFIX Futures which expires on December 2010TGB5H11 : 5 Year Government Bond Futures which expires on March 2011
Contract Specification
TBF6 PriceQuote in 100 – yield (3 decimal), spread 0.005(Bt250 on 10MN Notional)
Bid 97.500 (2.500%) – Offer 97.505 (2.495%)Cash flow ?
Margin when open position & P/L at expiration
TGB5 PriceQuote in percent of Face (2 decimal), spread 0.01(Bt100 on 1MN Notional)
Bid 97.50 (5.5799%) – Offer 97.51 (5.5775%)Cash flow ?
Margin when open position & P/L at expiration
Derivatives Back Office Operation Process
Outline
Get to Known by Tanavatt BhanijkasemKnow about TFEXTrading in TFEXContract Specification
Derivative Back Office Operation Process by Rungrat SriniratsaiTrade & Settlement FlowProcess Flow• Account Opening• Settlement and MTM
Report List
Clients
FAX / E-mail Pay-in Slip
Place OrderTrading
T+1
Submit Application1& Supporting Doc.
Account Opening
Before Trading
Investment
Deposit Initial Margin1
2
3
4
EOD
KYC / CDDCredit ReviewAccount Opening
2
Segregate Bank A/C
Clients
Clients
Submit Order
Order MatchingConfirm Deal
5
7
Pre-Trade Confirmation
+/- Credit Line 6
9
Settlement12
Mark to Market8
Clients
+/- Collateral based on settlement amount
11
Segregate Bank A/C
Margin CallDaily Confirmation (e-Mail)
10
Clients
Monthly Monthly Statement
12 Generate month-ended statement
14
Segregate Bank A/C
Interest Payment*13
* Interest payment and WHT Slip shall be processed at 6th, 12th month
BrokerBroker
BrokerBroker
BrokerBroker
BrokerBroker
BrokerBroker
Account Opening
Application Form and Agreement signed by authorized personRisk DisclosureKYC / CDD processSupporting Document
Latest financial statements List of authorized directors to act on behalf of the companyLatest of Business Registration Certificate
Copy of key passport / personal ID card of authorized directors and/or authorized signatory and key work permit pages
Position Limit
Position Limit (Contracts)
--<= 20,000Interest Rate
Futures Option F&O
SET50 <= 20,000 <= 20,000 <= 20,000
Single Stock <= 20,000 - -
Gold No limit - -
Mini Gold No limit - -
Margin Required
2 Type of marginsInitial Margin• The minimum amount of money that must be in and
investment account on the day of a transaction.• On futures accounts, the initial margin must be met on any day
in which the opening balance starts off below the maintenance margin requirement.
Maintenance Margin• The minimum amount of money that much be kept in a margin
account on any day other than the day of a transaction.
Collateral Rate
Collateral Rate (Baht/Contract)
Note : for single stock futures please see at www.thaiclearing.com
Margin Multiplier
-TBD4,200Govt Bond - 5 Yrs
-TBD20,000Interest Rate - 6 Mth
Outright margin
Spread Margin (each pair)
Option Min. Charge
SET 50 24,000 6,000 500
Gold 30,000 7,500 -
Mini Gold 6,000 1,500 -
Initial Margin Maintenance Margin
1.35 1.00
Settlement Value – 6 Mth Interest Rate
Settlement Value = Initial Margin + Commission + VAT – WHT
Example
Symbol : TBF6Z10 (6 M THBFIX Futures which expires on December 2010)
Open Position : 1 contract
Initial Margin : 27,000 Baht / contract (20,000 * 1.35)
Commission : 200 Baht / Contract
FAX / E-mail Pay-in Slip
Deposit Initial Margin1
2 Segregate Bank A/C
ClientsBrokerBroker
Before Trading
Settlement Value
Settlement Value = Initial Margin + Commission + VAT – WHT27,208 27,000 + 200 + 14 - 6
Mark to Market – 6 Mth Interest Rate• Margin Method : Net or Gross (by using PC-SPAN)
If Equity Balance < Maintenance Margin, Client pay Margin Call up to Initial Margin required.• Closing Method : FIFO or Manual
Example Mr. A open has position 1 contract on TBF6Z10
102,000-25,000Sell TBF6Z10 @ 99.0004
127,000+ 100,00099.500MTM
27,000+ 25,000Margin Call3
2,000- 75,00097.500MTM2
77,000+50,00099.000MTM
27,000Buy TBF6Z10 @ 98.0001
CollateralDeposit / Withdraw
Gain / LossClosing PriceTransactionDay
In summary, Mr. A gain = (99.000 – 98.000) * 50,000 = 50,000.00 Baht
Settlement Value – 5 Years Government Bond
Settlement Value = Initial Margin + Commission + VAT – WHT
Example
Symbol : TGB5H11 (5 Year Government Bond Futures which expires on March 2011)
Open Position : 1 contract
Initial Margin : 5,670 Baht / contract (4,200 * 1.35)
Commission : 200 Baht / Contract
FAX / E-mail Pay-in Slip
Deposit Initial Margin1
2 Segregate Bank A/C
ClientsBrokerBroker
Before Trading
Settlement Value
Settlement Value = Initial Margin + Commission + VAT – WHT5,878 5,670 + 200 + 14 - 6
Mark to Market – 5 Years Government Bond
• Margin Method : Net or Gross (by using PC-SPAN)If Equity Balance < Maintenance Margin, Client pay Margin Call up to Initial Margin required.
• Closing Method : FIFO or Manual
Example Mr. A open has position 1 contract on TGB5H11
20,670-5,000Sell TGB5H11 @ 99.0004
25,670+ 20,00099.500MTM
5,670+ 5,000Margin Call3
670- 15,00097.500MTM2
15,670+10,00099.000MTM
5,670Buy TGB5H11 @ 98.0001
CollateralDeposit / Withdraw
Gain / LossClosing PriceTransactionDay
In summary, Mr. A gain = (99.000 – 98.000) * 10,000 = 10,000.00 Baht
On Last Trading Day
Cash SettlementInterest Rate THBFIX 6 month• Calculate from Interest rate 6M THBFIX which announce by Reuters at
11.00 am of the last trading day.
• By using 4 decimal digits
• Final Settlement Price = 100 – 6M THBFIX rate
99.9500 = 100 – 0.0500
5-Year Thai Government Bond with 5% Coupon• Based on basket of eligible bond – A designated of Government Bonds with
a minimum issuance size of B5,000 Billion and 4-6 year term to maturity on the first calendar day of the contract month.
• Calculate from average yield quoted by primary dealers. By using 4 decimal digits
On Last Trading Day – 6 Mth Interest Rate• The 3rd Wednesday of the contract month. • Time at which trading ceases on Last trading day is 11.00 a.m.• Closing position by using TFEX Settlement Price
Example Mr. A open has position 1 contract on TBF6Z10
99.500Auto Close position TBFZ10 @ TFEX settlement price
Last Trading Day
127,000+ 100,00099.500MTM
27,000+ 25,000Margin Call3
2,000- 75,00097.500MTM2
77,000+50,00099.000MTM
27,000Buy TBFZ10 @ 98.0001
CollateralDeposit / Withdraw
Gain / LossClosing PriceTransactionDay
In summary, Mr. A gain = (99.500 – 98.000) * 50,000 = 75,000 Baht
On Last Trading Day – 5 Years Government Bond• The 3rd Wednesday of the contract month. • Time at which trading ceases on Last trading day is 16.00 a.m.• Closing position by using TFEX Settlement Price
Example Mr. A open has position 1 contract on TGB5H11
99.500Auto Close position TGB5H11 @ TFEX settlement price
Last Trading Day
25,670+ 20,00099.500MTM
5,670+ 5,000Margin Call3
670- 15,00097.500MTM2
15,670+10,00099.000MTM
5,670Buy TGB5H11 @ 98.0001
CollateralDeposit / Withdraw
Gain / LossClosing PriceTransactionDay
In summary, Mr. A gain = (99.500 – 98.000) * 10,000 = 15,000 Baht
Payment Method
Payment MethodChequeBahtNetGood Fund TransferATS
For margin call, Money shall be good fund before noon.
For excess margin withdrawal, Request in written document signed by authorized persons
Money shall be good fund at T+1
Report Scheduling
TPre Confirmation
<= M+7
<= M+7
T+1
T+1
Report Scheduling Client Acting
Daily Confirmation
Margin Call Pay margin call before noon
Monthly Statement
WHT Slip (every 6 month)
Excess Margin withdrawal request
T 10.00 a.m.
12 October 2010 25
Q & A