Margin Methodology

Margin Methodology:

Initial Margin:

AD Clear sets Initial Margin parameters, which are calculated using the Delta Hedge Method. The key components include:

• Price Scanning Range: A range of price changes used to calculate margin.
• Intra-Commodity Spread Margin and Charge: Margins for positions within the same commodity.
• Inter-Commodity Spread Credit: Credits for offsetting positions across different commodities.

Clearing Members are notified of changes in these parameters through notices or circulars. Adjustments can occur monthly or as needed during volatile market conditions.

Variation Margin:

All trades and open positions are marked to market (MTM) for settlement during the end-of-day clearing cycle. This is based on the latest Daily Settlement Prices or the Final Settlement Price. MTM profits and losses are credited or debited to Clearing Members' Collateral Pledged Accounts (CPA). Any deficits in these accounts trigger Margin Calls for Clearing Members to meet their MTM obligations.

Additional Margin:

AD Clear may impose Additional Margins in specific circumstances, such as:

• Large Exposures: When potential losses exceed a preset percentage of the Default Fund.
• Position Concentration: When a Clearing Member holds significant open positions that could affect market liquidity.
• Credit Concerns: If a Clearing Member's credit standing deteriorates or adverse market indicators arise.