6.3	A CCP should adopt initial margin models and parameters that are risk-based and generate margin requirements sufficient to cover its potential future exposure to participants in the interval between the last margin collection and the close out of positions following a participant default. Initial margin should meet an established single-tailed confidence level of at least 99 percent with respect to the estimated distribution of future exposure. For a CCP that calculates margin at the portfolio level, this requirement applies to each portfolio’s distribution of future exposure. For a CCP that calculates margin at more-granular levels, such as at the subportfolio level or by product, the requirement must be met for the corresponding distributions of future exposure. The model should (a) use a conservative estimate of the time horizons for the effective hedging or close out of the particular types of products cleared by the CCP (including in stressed market conditions), (b) have an appropriate method for measuring credit exposure that accounts for relevant product risk factors and portfolio effects across products, and (c) to the extent practicable and prudent, limit the need for destabilising, procyclical changes.
APEX Clear sets all the margin parameters at the product level using a historical volatility based margin model. The model would be set to cover the price movements at one-tailed 99% confidence level. The look-back periods to compute the historical volatility could be 3, 6, or 12 months or 5 years. The liquidation period (close out period) for a futures contract is set based on an estimation of the number of days the positions can be liquidated during stressed market conditions. APEX Clear calculates the initial margins and delivery margins at the portfolio (position account) level by using SPAN margin methodology, which makes use of various margin parameters, price scanning, volatility scanning, intra-commodity spread charges and intra- commodity spread credits. These parameters would be also based on historical volatility based margin models. In addition, APEX Clear constantly monitors the markets to identify any significant market events that might affect the market volatility.
6.4	A CCP should mark participant positions to market and collect variation margin at least daily to limit the build-up of current exposures. A CCP should have the authority and operational capacity to make intraday margin calls and payments, both scheduled and unscheduled, to participants.
APEX Clear determines the daily settlement prices for all the contracts cleared by APEX Clear. The daily settlement price methodology is mainly based on the market prices and under exceptional circumstances, APEX Clear may use other markets’ prices or market participants’ quotations as reference to reflect the fair market values. All the trades and open positions are marked to market two times daily against the market prices (for the intraday cycles) or the daily settlement prices (for the end-of-day cycle) to prevent the build-up of price risks. APEX Clear collects the variation margins (net losses) in the customer or proprietary member unit of each clearing member. Under Clearing Rule 406.4 Variation Margin, Clearing Members have to meet the margin calls as instructed by APEX Clear. In the Clearing Procedures, APEX Clear specifies that Clearing Members should meet the margin calls either on the same day or the next business day (for the end-of-day cycle or the cycle after night trading). APEX Clear may also make ad-hoc margin calls when the market is volatile.