Collateral Management

The ACG Cross Training, Dhaka 2-5 July 2009

Indonesian Clearing and Guarantee Corporation (KPEI)

Indonesia Stock Exchange Building, Tower 1 4-5th Fl
Jl. Jend. Sudirman Kav. 52 – 53
Jakarta - INDONESIA
 Agenda
• Overview
• Collateral Structure for Equities, Bonds, and SBL Transactions
• Acceptable Collateral Criterion
• Collateral Valuation
• Perfect Collateral
• KPEI Financial Buffer (for Defaulting Members)
• Risk Management Development at KPEI
 Overview

• Collateral as one of Risk Management Tools in KPEI.

• Collateral Management:
– Must be valued properly
– Must be sufficient
• Comparison against Exposure / Outstanding Positions
• Part of Trading Limit Calculation (Equities, Bonds Market, SBL
Transaction)
• Collateral Management Development
 General Scheme of Risk Management KPEI
Placement / Margin Call
kpei
Collateral
Netting/Novation
Member
Memberships Req
and NAWC
iMac

Right/Obligation

Risk Calculation
Trading
Limit Risk Exposure

-
SX Trading Free Collateral

Guarantee Fund
GF Charge Management
 COLLATERAL STRUCTURE
Stock
Bank Exchange Treasury
Guarantee Seat Gov Bond Bills (SBI)
Time Deposit

Offline
Collateral

Online
Collateral Total
Collateral

Account
004
Cash Securities
 Instruments Acceptable as Collateral
Offline Collateral (ownership documents given to KPEI)
• Time Deposit (IDR and US$)
- haircut: 2% - 5%
• Bank Guarantee (IDR and US$)
- haircut: 5%
• Stock Exchange Membership Seat (Equity and Fixed Income)
• Indonesian Government Bonds (Fixed Rate, Variable Rate and Retail)
- haircut: 10% - 20% (could also be place in online collateral account)
• BI Treasury Bills (Sertifikat Bank Indonesia)
- haircut: 5%
Online Collateral (linked to the Indonesian Central Securities Depository)
• Cash
- currently national currency (IDR) and (USD)
- future; other currencies (Euro, Yen, etc).
• Listed securities
- Stocks, Indonesian Government Bonds, Corporate Bonds
- haircut: 5% - 100%
 Online Collateral Valuation

• Cash (IDR),
- valued 100 % (No Haircut)
- get interest from participating banks
• Acceptable Securities,
- marked to market, lowest price in last three trading days.
- haircut determined by fundamental & market analysis
(liquidity & volatility)
 COLLATERAL VALUATION
Online Collateral in Collateral account at KSEI :
Collateral Valuation
Cash 100 %
Securities (Lowest Price and Haircut )
Offline Collateral deposited to KPEI :
Collateral Valuation
==============================================================
Time Deposit (IDR) 98 %
Time Deposit (US$) 95 %
Bank Guarantee 95 %
Stock Exchange Memberships IDR 50.000.000
SBI (Certificate of Central Bank) 98%
Bonds Haircut from Rating
 MARKED TO MARKET

 Marked to market is done when there is a new lowest / highest

price of securities

 Adjustment of collateral and exposure is done two times a day:

 Interday:
 End of day
 Intraday:
 End of first session
 Every 30 minutes (in progress)
PERFECT COLLATERAL
 What is Perfect Collateral ?

• Perfect Collateral is securities owned by CM in Delivery

Acc./and Collateral Acc. that match with CM’s outstanding
obligations

• If CM has obligations to deliver the same stocks which its own

in Delivery Acc. / and Collateral Acc., then those obligations
will be released. It’s called perfect collateral until settlement
date due (T+3).
 How ?
Deliver
Securities
/Cash

002 & 004

Decreasing
Blocked Collateral

Similar Yes
Perfect
Securities Collateral
/ Cash ?

No

No Changing on
Blocked Collateral
 Collateral Placed in KPEI Acc.
Total Collateral Value (Offline & Online) placed in KPEI Acc. as of
29/05/2009: IDR 6.300.332.855.416 (US$ 630.033.285)
Consist of :
- Offline Collateral : IDR 4,139,270,765,063 (US$ 413,927,076)
- Online Collateral : IDR 3,614,182,147,574 (US$ 361,418,214)
- Cash : IDR 355,819,101,705 (US$ 35,581,910)
- Securities : IDR 3,258,363,045,869 (US$ 325,836,304)

Currency Notes:
US$ 1 = IDR 10,000
 Guarantee Funds Positions

Guarantee Funds managed by KPEI

as of 29/05/2009: IDR 978,409,578,437,-
(US$ 97,840,957)

Currency Notes:
US$ 1 = IDR 10,000
 KPEI Financial Buffer

Based on Government Regulation (Bapepam) No.III.B.6: Guarantee for

Transactions in SX
1. Cash in Defaulting Member’s Collateral Account,
2. Selling Out Securities in Defaulting Member’s Collateral Account,
3. Credit Line from Banks,
4. Reserved Funds from part of KPEI’s Current Year Pre-Tax Earning
5. Selling Out Defaulting Members’ SX Memberships,
6. Guarantee Funds, as of 29/05/2009: IDR 978,409,578,437 (US$ 97,840,957)
7. Credit Ring from All Clearing Members of KPEI

Currency Notes:
US$ 1 = IDR 10,000
 Risk Management Development at
KPEI
• Risk exposure calculation:
– Hs VaR at portfolio basis
– Net exposure as sum of three days outstanding positions exposure
– Exposure calculation up to client level
• Collateral Management Development:
– Pool collateral account (Clearing Member account) and client’s
subaccount
– Eligibility for collateral allocation
• Update free collateral (exposure and market data at near real time basis)
Q&A