- Evaluation of Collateral
- Among the collaterals, substitute securities and foreign currencies are subject to changes in value and the possibility of the decline of the collateral value. Therefore, substitute securities and foreign currencies are recognized only up to a certain ratio (haircut) of the base prices to secure sufficient collateral value in case of collateral devaluation in emergency. The KRX evaluates collaterals by their market value every day to measure the accurate collateral value.
- Collateral Assessment Recognition Ratio
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Collateral assessment ratio (haircut ratio) should be determined by fully taking into consideration emergent situation to secure collateral disposal value that amounts over the collateral assessment amount and is calculated by measuring historical price volatility and liquidity. In addition, to limit the procyclical changes, the volatility measurement period and the confidence level are set in a conservative manner.
주의Assessment rate = Min[95%, 100% - |(Base yield x Procyclicality mitigation factor - Bank buying commission)|]
< Assessment rates of Foreign Currencies > Classification Type of asset Foreign currencies USD, JPY, EUR, GBP, HKD, AUD, SGD, CHF, CAD, CNY 95%주의 - - Base yield: The base yield refers to a value corresponding to the 99th percentile by sorting the base yields for the assessment period in descending order.
- - Calculation of base yields: Log(Basic rate(t-day) / Basic rate(t-2 day))
- - Procyclicality mitigation factor: 1.25
- - Bank buying commission = Buying rate - Basic rate
< Assessment rates of listed debt Securities > Classification Terms to maturity Type of Issuer Credit Rating ≤1 Year >1 Year
and ≤3 Years>3 Years
and ≤5 Years>5 Years
and ≤10 Year>10 Years Government Bond Group n/a 98% 97% 96% 95% 93% Special Purpose
Bond Group
(Government Guarantee)AAA 96% 95% 94% 93% 91% AA+ ~ AA- 94% 93% 92% 91% 89% A+ ~ BBB+ 92% 91% 90% 89% 87% BBB ~ BBB- 88% 86% 84% 82% 78% BB+ ~ 84% 82% 80% 78% 74% Special Purpose
Bond GroupAAA 94% 93% 92% 91% 89% AA+ ~ AA- 92% 91% 90% 89% 87% A+ ~ BBB+ 90% 89% 88% 87% 85% BBB ~ BBB- 86% 84% 82% 80% 76% BB+ ~ 82% 80% 78% 76% 72% Municipal Bond Group n/a 92% 91% 90% 89% 87% Corporate Bond Group (Financial Institutions) AAA 90% 89% 88% 87% 85% AA+ ~ AA- 88% 87% 86% 85% 83% A+ ~ BBB+ 86% 85% 84% 83% 81% BBB ~ BBB- 82% 80% 78% 76% 72% BB+ ~ 78% 76% 74% 72% 68% Corporate Bond Group AAA 88% 87% 86% 85% 83% AA+ ~ AA- 86% 85% 84% 83% 81% A+ ~ BBB+ 84% 83% 82% 81% 79% BBB ~ BBB- 80% 78% 76% 74% 70% BB+ ~ 76% 74% 72% 70% 66% 주의Reference< Assessment rates of listed stocks > Classification Yield Grades 1st 2nd 3rd 4th 5th 6th Liquidity Grades 1st 80% 78% 76% 74% 72% 70% 2nd 78% 76% 74% 72% 70% 68% 3rd 76% 74% 72% 70% 68% 66% 4th 74% 72% 70% 68% 66% 64% 5th 72% 70% 68% 66% 64% 62% 6th 70% 68% 66% 64% 62% 60% - - Enforcement Rules of Derivatives Market Business Regulation Annex 19-4.
- - Enforcement Rules of KOSPI Market Business Regulation Annex 6, 9, 10.
- Collateral concentration limits
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The KRX avoids undue concentration of collateral in a particular asset class in order to promote the prompt disposal of collateral assets and to prevent adverse price movements. The collateral assets subject to such concentration limits are limited to corporate bonds and shares with relatively higher credit, liquidity, and market risks among the eligible collateral assets.
- 【For reference: Concentration limits】
- The stock and derivatives markets: For any listed stock, 50% of the average daily trading value thereof for the immediately preceding year, and for any listed corporate bond, 10% of the listed amount thereof per issuer.
Concentration limits are applied to individual participants (clearing members), and if any individual participant deposits a collateral asset exceeding the concentration limit, the collateral value of the exceeding amount shall not be acknowledged.
- Upper limits on the amount of non-cash collateral deposited as a margin
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In order to enhance the cashability and stability of collateral assets deposited as a clearing margin, the KRX sets an upper limit of 40% on the amount of non-cash collateral among substitute securities deposited by clearing members as a clearing margin (in the case of the exchange-traded derivatives market, the upper limit on the amount of such collateral deposited as clearing margin for trustors is set at 70%).
- 【For reference: Classification of cashable assets】
- Cashable assets: Korean Won currency, foreign currencies (foreign currency securities), KTBs, special purpose bonds, and municipal bonds.
- Non-cash assets: Substitute securities, including stocks, ETFs, ETNs, beneficiary certificates, and corporate bonds, other than cashable assets.