Margin refers to cash or security paid by clearing members to SHCH, used to cover losses caused by clearing members’ own default. There are three types of margins - initial margin, MTM margin and special margin.  SHCH will calculate the margin

requirements on a daily basis based on the participants' net positions or risk exposures, mark-to-market profits and losses and other special risk factors. Margins are back-tested daily and reviewed at least quarterly.

Initial Margin

Initial margin contributed by a clearing member shall be used to cover the potential losses arising from default management by SHCH in the event of such clearing member default. Initial margin shall include minimum margin and excess margin. SHCH calculates the initial margin based on the loss of positions held by clearing members under certain confidence level and adjusts it upward based on the credit status of clearing members.

Mark-to-market Margin (MTM margin)

MTM margin shall be used to cover the MTM losses of the positions held by a clearing member. The MTM margin is calculated and exchanged on a daily basis.

Special Margin

The special margin shall be used to cover the additional potential losses caused by clearing members’ defaults under abnormal circumstances such as:

(1) Abnormal fluctuations in market prices;

(2) Excessive concentration of clearing members’ positions;

(3) Consecutive holidays;

(4) Other circumstances determined by SHCH.

Margin Methodology Transparency

Parameters used in SHCH’s margin model can be found by referring to the quarterly PFMI quantitative disclosures. SHCH RiSCc platform provides a consolidated calculation service from curve construction to margin calculation for IRS, FX derivatives and credit derivatives. Bloomberg Terminal users can enter the command “SWPM CNY” to perform margin calculation for a single interest rate swap cleared by the SHCH. For Bloomberg Terminal users who have enabled the MARS function, entering the command “MARS” allows margin calculation for a portfolio of contracts.

Initial Magin Models for Some Products