Moscow Exchange FBOT Form [Supplement S-1]

APPENDIX 12

[Methodology for setting Price Variation Limits for Derivatives] 

Please find attached:

 Methodology for setting Price Variation Limits for Derivatives
Moscow Exchange FBOT Form [Supplement S-1]

APPENDIX 12

[Methodology for setting Price Variation Limits for Derivatives] 

APPROVED

by the Executive Board

Bank National Clearing Centre 

(Joint-Stock Company)

May 26, 2015 (Minutes No.17)

METHODOLOGY FOR SETTING PRICE VARIATION LIMITS

FOR DERIVATIVES 

THE NCC CLEARING BANK 
Moscow Exchange FBOT Form [Supplement S-1]

APPENDIX 12

[Methodology for setting Price Variation Limits for Derivatives] 

I. Introduction 

This Methodology for Setting Price Variation Limits (the “Methodology”) is to set out how price 

variation limits for trades in futures contracts executed on the Moscow Exchange Derivatives Market, the 

Moscow Energy Exchange and the National Mercantile Exchange Sector for Regular Contracts on Grain, 

Legumes and Industrial Crops are calculated and set. 

The following abbreviations and definitions are used in this Methodology:

Clearing Center (the “CC”) means the NCC Clearing Bank operating based on the 

clearing license and the Clearing Law.

Clearing Rules (the “Clearing Rules”) means the Clearing Center Clearing Rules. 

Trading Rules of the Derivatives Market (the “Trading Rules”) means rules of on-exchange trading 

in futures contracts that are applied on the Moscow Exchange Derivatives Market and/or the Moscow 

Energy Exchange Derivatives Section and/or the National Mercantile Exchange Sector for Regular 

Contracts on Grain, Legumes and Industrial Crops.

Exchange Trading System shall be designated hereinafter as TS.

Other terms have the meanings ascribed to them by the laws of the Russian Federation, the Clearing 

Rules, other internal documents of the Clearing Center, and the Trading Rules.

The following basic risk parameters are used in this Methodology:

No Parameter Designation

1 Futures contract settlement price РЦ

2 Futures contracts tick size MinStep

3 Minimum basic size of initial margin (%) MinIM

4 Futures contract price variation limit (the “Limit”) Lim

5 Futures contract price variation limit up/down (the “Limit up and Limit 

down)

Lim_H, Lim_L

6 Spread coefficient (in fractions). Set for each expiration date Spread

The parameters РЦ and MinStep are determined in accordance with Contract Specifications and/or the 

Trading Rules. 

The parameters Spread and MinIM are set and changed as decided by the CС. The parameter Spread is 

set for each expiration date of futures contracts on the same underlying asset in the group, and the 

unified parameter MinIM is set for all futures on the same underlying asset.

The parameters Lim, Lim_H and Lim_L are determined in accordance with this Methodology.

For the purpose of this Methodology, futures contract s on the same underlying asset are brought into a 

group as decided by the Clearing Center.

The CC determines the group’s main contract (the “Main Contract”) and publishes it on its website. 

All contracts within a group are Minor Contracts except the group’s Main Contract. 

II. Determining risk parameters during the clearing session 

1. The following additional risk parameters are used to determine the risk parameters Lim, Lim_H

and Lim_L during the clearing session:

No Parameter Designation

1 Number of Settlement periods of high volatility I_num

2 Variation of the contract’s Settlement price (in fractions of the Limit). Used I_criteria
Moscow Exchange FBOT Form [Supplement S-1]

APPENDIX 12

[Methodology for setting Price Variation Limits for Derivatives] 

as a volatility increase factor 

3 Variation of the contract’s Settlement price (in fractions of the Limit). Used 

to change the Limits when volatility rises

I_perc

4 Number of Settlement periods of low volatility D_num

5 Variation of the contract’s Settlement price (in fractions of the Limit). Used 

as a volatility decrease factor

D_criteria

6 Variation of the contract’s Settlement price (in fractions of the Limit). Used 

to change the Limits when volatility declines

D_perc

7 Time spent to control the adequacy of the Limit up (Limit down) (in 

minutes) before the Settlement Period ends

E_time

8 Width of the monitoring range (in fractions). Used to control the adequacy 

of the Limit up (Limit down) 

Th

9 Minimum share of open interest in the contract vs. open interest in all 

futures contracts on the same underlying asset 

Th_OI

10 Limit value in the model Lim_model

11 Futures contract price limit calculated in the previous clearing session (the 

previous Limit) 

Lim_prev

Risk parameters 1-9 are set by the Clearing Center.

2. During the clearing session, it calculates the Limit as follows for each futures contract: 

2.1.An initial (first) value of the Limit is calculated as follows on the Contract’s first trading day: 

Lim =

MinIM

2

× РЦ

2.2.The CC calculates Lim_model as per the following formula:

Lim_model = (1 + I_perc) × Lim_prev

If any of the following conditions is met:

 |РЦ − РЦ_prev| ≥ Lim_prev – i.e. the absolute variation of the Settlement 

Price in the previous Settlement Period exceeds the previous Limit;

 ∀i ∈ I_num ∶ |РЦi − РЦi−1

| ≥ I_criteria × Lim_prev – i.e. the absolute 

variation of the Settlement Price in every period of high volatility I_num in the 

previous Settlement Period exceeds the previous Limit multiplied by the volatility 

increase factor I_criteri;

 At least one non-negotiated working bid/ask in the futures at the price not 

varying from the Limit up/down by more than Th is available in the Exchange’s 

trading system continuously during the last minutes E_time, provided that 

number of open futures contracts does not exceed Th_OI percent of the total 

number of open futures contracts on the same underlying. 

2.3.The CC calculates Lim_model as per the following formula:

Lim_model = (1 − D_perc) × Lim_prev

If the following condition is met:

∀i ∈ D_num ∶ |РЦi − РЦi−1

| < D_criteria × Lim_prev – i.e. the absolute 

variation of the Settlement Price in every period of low volatility D_num in 

previous Settlement Periods is less than the previous Limit multiplied by the 

volatility decrease factor. 
Moscow Exchange FBOT Form [Supplement S-1]

APPENDIX 12

[Methodology for setting Price Variation Limits for Derivatives] 

2.4.In any other cases, the CC sets Lim_model equal to Lim_prev.

2.5.The final Limit is set as follows for Main Contracts and Derivatives outside the group: 

Lim = max [Lim_model;

MinIM

2

× РЦ]

2.6.The final Limit is set as follows for Minor Contracts: 

Lim = Lim(BaseContract) × Spread

3. During the clearing session, the Limit up and Limit down are calculated for each futures 

contract as per following formulae: 

Lim_H = РЦ + Lim

Lim_L = РЦ − Lim

4. The Limit Up (Limit Down) are rounded up (down) to MinStep.

III. Monitoring and changing risk parameters during the Settlement period 

1. The following additional risk parameters are used to monitor the adequacy and change risk 

parameters Lim, Lim_H and Lim_L during the clearing session:

No Parameter Designation

1 Time spent to control the adequacy of the Limit up (Limit down) (in 

minutes) during the Settlement Period

Th_time

2 Width of the monitoring range (in fractions). Used to control the 

adequacy of the Price Variation Limit up (Limit down)

Th

3 Minimum share of open interest in the contract vs. open interest in all 

futures contracts on the same underlying asset regulated by the same 

Specifications

Th_OI

4 Maximum number of changes of the Limits over the Settlement Period Max_shift

5 Size of the first increase from the beginning of the Settlement Period 

(in fractions of the Limit)

Shift_1

6 Size of the second and further increase from the beginning of the 

Settlement Period (in fractions of the Limit)

Shift_2

7 Current Limit in the Settlement Period Lim_cur

8 Current price deviation Limit Up and Limit Down Lim_H_cur, 

Lim_L_cur

2. The CC increases the Limit for a futures contract during the Settlement Period if the following 

conditions are met one after another: 

a. At least one non-negotiated working bid/ask in the futures at the price not varying 

from the Limit up/down by more than Th is available in the Exchange’s trading 

system continuously during the Th_time. 

b. Number of open positions in the futures is greater than the established minimum 

Th_OI of the total open interest in all futures contracts on the same underlying 

asset regulated by the same Specifications.

3. If conditions a and b of clause 2, Section III above are true throughout the Settlement Period, 

trading in the given futures and all contracts on the same underlying assets regulated by the 

same Specifications is halted for no more than fifteen (15) minutes. 
Moscow Exchange FBOT Form [Supplement S-1]

APPENDIX 12

[Methodology for setting Price Variation Limits for Derivatives] 

4. To trigger a trading halt for the reason given in clause 3 above, the CC sends to the Exchange a 

relevant notice via the TS. 

5. When increased for the first time in the Settlement Period, the Limit and the Price Variation 

Limit Up/Down for the futures are adjusted as follows: 

Lim_cur = (1 + Shift_1) × Lim

Lim_H_cur = РЦ + Lim_cur

Lim_L_cur = РЦ − Lim_cur

6. When increased for the second (further) time in the Settlement Period, the Price Variation Limit 

Up/Down for the futures are adjusted as follows: 

a. If prices rise:

Lim_L_cur = Lim_L

Lim_H_cur = РЦ + (1 + Shift_2) × Lim_cur

b. If prices fall:

Lim_H_cur = Lim_H

Lim_L_cur = РЦ − (1 + Shift_2) × Lim_cur

7. When increased for the second (further) time in the Settlement Period, the Limit for the futures 

is adjusted as follows: 

Lim_cur =

(Lim_H_cur − Lim_L_cur)

2

8. The CC changes the Limits for Minor Contracts as follows after changing the Limits for the Main 

Contract: 

Lim_cur = Lim_cur(BaseContract) × Spread

Lim_H_cur = РЦ + Lim_cur

Lim_L_cur = РЦ − Lim_cur,

unless the Limit for the Minor Contract has already been increased more times than the Limit 

for the Main Contracts has been increased. 

9. After increasing the Limit, the CC sends to the Exchange a notice to allow trading resumption. 

10. The Price Variation Limit is allowed to be increased for a specific futures contract no more 

than Max_shift times in the Settlement Period. 

11. The Price Variation Limit Up (Limit Down) is rounded up (down) to MinStep.