Collateral Management

Indonesian Clearing and Guarantee Corporation (KPEI)

Indonesia Stock Exchange Building, Tower 1 4-5
th
Fl
Jl. Jend. Sudirman Kav. 52 53
Jakarta - INDONESIA
The ACG Cross Training, Dhaka 2-5 July 2009
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
SX Trading
Collateral
Placement / Margin Call
Netting/Novation
Risk Exposure
Right/Obligation
iMac
Member
Free Collateral
Risk Calculation
Guarantee Fund
Management
Trading
Limit
GF Charge
kpei
-
Memberships Req
and NAWC
COLLATERAL STRUCTURE
Offline
Collateral
Online
Collateral
Total
Collateral
Time Deposit
Gov Bond
Bank
Guarantee
Stock
Exchange
Seat
Treasury
Bills (SBI)
Cash Securities
Account
004
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 CMs 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. Its called perfect collateral until settlement
date due (T+3).
How ?
Similar
Securities
/ Cash ?
Perfect
Collateral
Yes
No Changing on
Blocked Collateral
No
002 & 004
Deliver
Securities
/Cash
Decreasing
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 Members Collateral Account,
2. Selling Out Securities in Defaulting Members Collateral Account,
3. Credit Line from Banks,
4. Reserved Funds from part of KPEIs 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 clients
subaccount
Eligibility for collateral allocation
Update free collateral (exposure and market data at near real time basis)

Q & A