Central Counterparty, risk management in Turkish futures market and margining

Global financial crisis, blazed up in 2008 and still in effect, ended up with running down the efficient, self-equilibrating, self-regulating, "miraculous" financial market paradigm and championed the idea of inefficient, instable, non-self regulating, "needy-indigent" financial markets. After crisis, major part of restructuring of financial market rules and financial market infrastructure regulations came along with recording, clearing and settlement operations and collateral management of trading activities in financial markets. Central Counterparty (CCP) is a capital market practice that a clearinghouse guarantees the clearing and settlement of trades in capital markets by positioning itself in the center of financial transaction and taking the role of buyer to seller and seller to buyer. Study results shows three main findings. At first, clearing and settlement practices of Turkish Organized Future Markets is substantially consistent with the CCP risk management framework. Turkish clearinghouse will be a CCP as from March 2014 and most of the risk management activities overlap with the CCP risk management framework. Secondly, margin policy of Turkish futures market affects the composition of margin contrary to a priori expectations. Result of the study shows that accretion practice reduces the cost of cash collateral to the market participants in proportion to non-cash collaterals and it creates incentive for market participants to commend cash collaterals for their margin liabilities. In line with the expectation, market participants are tend to consign cash collateral to clearinghouse. At last, analysis about the effectiveness of margin management held and by using value-at-risk methodology, it is attempt to estimate daily theoretical margin amount by the help of the total daily loss of futures contracts. Later on, theoretical margin amounts are compared clearinghouse's total margin requirement amounts which are demanded from market participants. Results show that clearinghouse's margin requirement amounts are insensitive to the market risk and act like a stabilizator for futures market.