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OTC Japanese Government BondsClearing Fund

Clearing Fund for OTC JGB

JGB OTC Clearing Fund is calculated at 18:30 on every business day, for the position of each clearing participant as of 7:00 on the day, using the amount of losses (risk amount under stressed conditions) which could occur in extreme but plausible market conditions (stressed conditions) exceeding initial margin (excess risk amount).
The required amount of Clearing Fund is the larger of either (i) sum of two largest excess risk over collateral amounts expected at the time of simultaneous defaults of two JGB OTC clearing participants (*1) or (ii) the average of the total of two largest excess risk over collateral amounts of two JGB OTC clearing participants for each day during the period of one hundred and twenty (120) days (excluding holidays) ending on the calculation day, prorating by the required amount of initial margin for each clearing participant on the calculation day (if such amount is less than the minimum required amount of JPY100 million, the required amount of Clearing Fund will be the minimum required amount).(*2)

(*1) Including other clearing participants which are its affiliates and others (referred to as subsidiaries and affiliates of clearing participants and a parent company of the relevant clearing participant, subsidiaries and affiliates of the relevant parent company).
(*2) The total required Clearing Fund for OTC JGB amount contributed by all Clearing Participants was JPY348.7B (as of Sep. 30, 2021)

Illustration of Clearing Fund

Illustration of Clearing Fund

Stress Scenarios Used for Calculations

In terms of stress scenarios, for fixed-rate coupon-bearing JGBs and discount JGBs, scenarios using Principal Component Analysis and historical scenarios, for floating-rate coupon-bearing JGBs, the scenario based on the market impact charge and for Inflation-Indexed JGBs, historical scenarios are generated. Based on these stress scenarios, potential losses arising for each JGB OTC clearing participant are calculated.