portfolio compression user guide july2011

CCIL Risk Management Department

Strictly Confidential 1

The Clearing Corporation of India Ltd

Portfolio Compression Interest Rate Swaps

User Guide for Member Participants

Risk Management Department



Index

1. Portfolio Compression Process Flow

2. Exchange of trade related details between CCIL and the members

3. Member Tolerance Inputs for Portfolio Compression

4. Result for Test Run - Output format-summary and trade details

5. Important Dos and Donts to be kept in mind during the exercise

6. Important Contact Details of CCIL officials

Annexures



1. Portfolio Compression Process Flow

Introduction: The first live run of the Portfolio Compression cycle will be spread across 5

business days starting from Friday, 22nd

Jul11 and ending on Thursday, 28th Jul11. The cycle

will begin with a trial run using the outstanding trades as at end of the day (EOD) 22nd

July11.

Successful completion of the trial run by Tuesday 26th

Jul11 will clear the way for the actual

final run which will commence on the night of Wednesday, 27th

Jul11 and shall culminate with

the settlement of obligations in the morning on 28th

Jul11. We present below an overview of

each activity which will form a part of this cycle along with the timelines that all participants are

expected to adhere to.

S No Date Activity Timeline

1 Friday,

22nd

Jul11

CCIL to provide each participant with all

outstanding MIBOR OIS trades as per its

database with MTM and PV01 values

arrived at by CCILs system using the

Swap curve of 22nd

Jul11.

This information will be provided in a

password protected excel file specially

designed for this purpose.

By midnight

2 Monday,

25th

Jul11

Members to return the same file back to

CCIL AFTER updating the following

fields:

Flag Y/N - trades to be considered

for tear up or not

MTM values (if Flag = Y then

mandatory)

PV01 values for the trades (if Flag = Y

then mandatory)

Dealer ID (eg. D1, D2 or D3)

(to be updated if separate dealer-wise PV01 tolerances are intended to be

Latest by 12-00 Noon



provided; else default value is D1)

Members to update the Tolerances file mailed

to them with their desired tolerances

3 Tuesday,

26th

Jul11

Data received from all members as per (2)

above will be processed by CCIL and

members will be intimated about:

Trades considered for tear up

Trades not considered for tear up

(with reasons)

By 9-00 AM

4 Tuesday,

26th

Jul11

Test run carried out at CCIL and the

results communicated to all the members

By 12-00 Noon

5 Tuesday,

26th

Jul11

Members to revert to CCIL with

confirmation of their acceptance of the

results

By 7-00 PM

6 Wednesday,

27th

Jul11

Members to be ready by the end of the day

with the same set of trade data as in (2)

above (i.e. outstanding trades as of EOD

22nd

Jul11) BUT updated with the MTM

and PV01 values using the Swap curve of

27th

Jul11.

CCIL to provide each participant with the

same set of trade data as in (2) above

updated with MTM and PV01 values

arrived at by CCILs system using the

Swap curve of 27th

Jul11.

CCILs trade data file will be made

available to members by 8-30 PM

(Critical)

7 Wednesday,

27th

Jul11

Members to return the same file back to

CCIL AFTER updating the following

fields:

Flag Y/N - trades to be considered

Latest by 10-30 PM (Critical)



for tear up or not

MTM values (if Flag = Y then

mandatory)

PV01 values (if Flag = Y then

mandatory)

Dealer ID (eg. D1, D2 or D3)

(If dealer-wise tolerances are stipulated; else

the Default Value is D1)

Members to also update the Tolerances file

mailed to them with their desired tolerances

and send the same back to CCIL

8 Wednesday,

27th

Jul11

Data received from all members as per (7)

above will be processed by CCIL and

members will be intimated about:

Trades considered for tear up

Trades not considered for tear up

(with reasons)

By 00-30 AM (i.e. on 28th

Jul11)

9

Thursday,

28th

Jul11

Final results advised to all members By 7-30 AM (Critical)

10 Thursday,

28th

Jul11

Confirmation of acceptance of results by

all members by the Head of Treasury /

Authorized Signatory

By 9-00 AM (Critical)

11 Thursday,

28th

Jul11

Members with a net payable position

arising as a result of portfolio compression

to Credit CCILs Settlement Account at RBI (Account No: 8710977) via RTGS

(RTGS IFSC -- CCIL0PI0001)

By 10-00 AM (Critical)

12 Thursday,

28th

Jul11

After all participants have confirmed

the result and all Pay-ins to CCIL have

been credited to CCILs account (as per

By 11-00 AM



11 above) CCIL to inform all members

about the successful completion of the

compression cycle by email.

Confirmation letter faxed to all the

member participants

By 12.00 Noon

13 Thursday,

28th

Jul11

Pay-outs due to members credited to their

account as a part of the normal daily non-

guaranteed settlement process.

By 11-30 AM

14 Thursday,

28th

Jul11

Processing of Reversals arising out of the

Portfolio Compression exercise on CCIL

IRS Reporting Platform and generation of

.csv files and PDF reports on CCILs

reports browser

Thus, members need not report the

terminated or partially terminated trades

separately.

By 5-00 PM

15 Thursday,

28th

Jul11

Database Updation in CCIL IRS FRA

Deal Reporting Utility

To be carried out by the member at its

end by uploading the .csv file into the

Deal Reporting Utility. This activity

needs to be completed by close of day

so as to ensure that the database of the

deal reporting utility is in sync



2. Exchange of trade related details between CCIL and the members

i. The base data for the compression cycle (trial run as well as the final run) will be

outstanding trades as per CCILs systems as at End of the Day (EOD) on Friday, 22nd

Jul11.

ii. Trades having cash flow in the next 7 days will be excluded from the list by CCIL.

iii. The trades data will be provided to you in a specially designed excel file which will be

locked and protected with a password which will be provided to you in a separate mail.

The file format will be as under:

1 VALUATION DATE

2 REPORTING_MEMBER_REF

3 CCIL TRADE ID

4 PAY_FIX / RECEIVE_FIX

5 MEMBER ID

6 COUNTERPARTY ID

7 BENCHMARK

8 FIXED RATE

9 NOTIONAL AMOUNT

10 TRADE DATE

11 EFFECTIVE DATE

12 TERMINATION DATE

13 CCIL MTM VALUE

14 CCIL PV01 VALUE

15 Indicator (Y / N) (Input by Member)



16 Member MTM VALUE (Input by Member)

17 Member PV01 VALUE (Input by Member)

18 DEALER ID (Input by Member)

19 Trade Excluded (Input by CCIL at 2nd stage)

20 Reason for Exclusion (Input by CCIL at 2nd stage)

iv. Please ensure that you send the same file back to CCIL after updating only those fields

marked for member updation by CCIL. Please do not create another file or change the

features of the file such as file protection or the file password.

v. The cells under the following fields will be kept unlocked to facilitate updation of the file

by the members as required by CCIL:

S No Field Name Remarks

1 Indicator (Y / N) To be input by Members

2 Member MTM VALUE To be input by Members for

all trades marked with

indicator Y in (1) above.

3 Member PV01 To be input by Members for

all trades marked with

indicator Y in (1) above.

4 DEALER ID Default value is D1. In case

members desire to give Dealer

level tolerances then they will

update this field to D1, D2

or D3 as the case may be. In

case you have a single dealer

then please do not update this

field.

5 REPORTING_MEMBER_REF Cell kept unlocked to facilitate

use of Excel functions like



VLOOKUP while updating

fields in S no 1 to 4 above

6 CCIL TRADE ID Cell kept unlocked to facilitate

use of Excel functions like

VLOOKUP while updating

fields in S no 1 to 4 above

vi. Against each trade to be considered for trade tear up exercise, members would provide an

indicator i.e. Y for trade to be considered and N for excluding the trade in the test run.

vii. After the trade data file is returned as above by all the members, CCIL will process the

data to identify the trades eligible for participation in the portfolio compression exercise.

viii. In case of any exclusion of trades, CCIL will provide the same set of trades in the same

excel sheet with reason of exclusion under the field Reason for exclusion. The reasons

for exclusion could be one of the following:

a. Trade not selected for compression by counterparty.

b. Variation in MTM values provided by the counterparties is more than 2% of the

lower MTM value.

c. Trade information incompletely furnished [e.g. trade marked as Y but MTM and

/ or PV01 not provided]



3. Member Tolerance Inputs for Portfolio Compression

A. Introduction:

We now discuss the manner in which the Members are required to submit their MTM and

PV01 tolerances for various criteria. Members have the option of defining the following

tolerances subject to which they would accept the results of the compression exercise:

S No Tolerance

1 Total MTM Payable & Receivable (optional) at portfolio level

2 Net PV01 change (at Portfolio level and also tenor wise)

3 Net PV01 change (at Dealer level and also tenor wise for trades of such

dealer)

4 Change in Counterparty exposure (counterparty wise)

Note:

1) MTM Tolerances are in terms of MTM payable (or receivable) at the time of

cancellation.

2) PV01 tolerances are for changes in PV01 at the overall portfolio level as well as for

various maturity time buckets (as defined by members) across the portfolio.

Please note that the Compression Algorithm is based on single PV01 value per

trade which is considered in the maturity bucket for the respective trade. No

separate maturity bucket-wise PV01 computed for trades is taken into

consideration.

Eg. If a trade with PV01 of Rs.10,00,000 (positive) with maturity between 2 and

3 years is considered for termination, the change in PV01 value is considered

against the total portfolio PV01 and against the sum of PV01 for trades with

maturity between 2 and 3 years maturity. No PV01 impact for other maturity

buckets (eg. In 0-1 years, 1-2 years) is considered for such terminations.



3) Members opting to give Dealer level PV01 tolerances may do so for the dealer

portfolio level (max 3 dealers are allowed) or for various maturity time buckets (as

defined by members) across the dealers portfolio.

4) The tolerance for changes in counter-party-wise exposure is in terms of counterparty-

wise MTM payable post early termination of identified trades based on MTM value

of trades provided by members.

B. Member Tolerance Input sheet:

The Member Tolerance Input excel file is used for obtaining the tolerance inputs from the

members. This sheet will be made available to members along with the trade details. The

members will fill the desired level of tolerances and will send back to CCIL. The format of the

excel file is as described below:

1. There are three sheets in this excel file. First sheet Instructions contains the instructions

for members about how to use this excel file. You are requested to carefully read this

sheet before you proceed to the other sheets in the file.

2. The sheet Member_Master contains the list of all the Member IDs along with Member

Names for the reference of the participating members in portfolio cycle. Screen shot of

the Member_Master sheets is given below:



3. As the name indicates, the sheet End Dates for corresponding tenors contains the end

dates for the various time buckets. CCIL has provided for tenor buckets to be defined in

multiples of 0.5 years (six months). For the trial run, the tenor end dates will be w.r.t.

22nd

Jul11 and for the final run, the tenor end dates will be w.r.t. 27th Jul11. The

Members will be intimated this in advance to help them decide the tenors for their time

buckets. The screen shot is given for reference.

4. The third sheet Tolerances is where the members are required to input the actual

tolerances for various criteria as listed below:

a. Portfolio Wise MTM Payable (at the time of cancellation)

b. Portfolio Wise MTM Receivable (at the time of cancellation) (optional - if not

input then put it as "Not Applicable")

c. Increase in Counterparty Wise (MTM) Exposure

d. Change in Portfolio level PV01 Bucket-wise

e. Change in Dealer level PV01 Bucket-wise (optional)



Members can give PV01 tolerances for upto three dealers at max. The Time Buckets are to be

entered in the format 00.00-00.00 for both Portfolio level & Dealer level PV01. The Buckets are

to be entered in multiples of 0.5 yrs only. If there is only one dealer, members will not put PV01

constraints for D1. Same portfolio wise Constraints will be considered as D1.

The screenshot below shows the form for recording the following tolerances:

1) MTM Payable (denoted by a negative number)

2) MTM receivable (denoted by a positive number)

3) Increase in counterparty-wise exposure (denoted by a positive number)

4) In respect of counterparty-wise exposures, the Members need to copy and paste the text Not Applicable against their own member ID and against the member IDs of members who are not their counter-parties.

Screenshot A below shows the form for entry of PV01 tolerances for the members portfolio.

Screenshot B shows the form for entry of PV01 tolerances for a Dealers portfolio The points to be

noted in this case are:

1) A positive number will denote permitted increase in PV01.

2) A negative number will denote permitted decrease in PV01

3) S No. 1 in the table will always be used to define the Portfolio level PV01 tolerance



Screenshot A:

Screenshot B:



4. Results of the Portfolio Compression exercise - Summary and trade details

After a run is over, the results would be advised to the members in the form of an excel

file. Thus the results of the trial run will be advised to the members by 12 Noon on

Tuesday, 26th

Jul11 and the results of the Final run will be advised to the members by

7-30 AM on Thursday, 28th

July11. The Instructions sheet guides the users on how to

navigate through the Results file. We request you to please go through the Instructions

sheet carefully before proceeding to interpret the results.

Apart from a summary of the results, the Results file also provides complete trade-wise

details. Against each trade, a value will be provided in the respective columns indicating

the extent of termination (fully or partially), Notional Amount for trades to be

terminated, MTM value of terminated trades and PV01 of terminated trades. The format

of the output trade file is as given below:

Sr. No Field Name Sample Value

1 VALUATION DATE 04-Aug-10

2 TRADE ID 200708311000053

3 PAY_FIX / REC_FIX PAY_FIX

4 MEMBER ID CCBPXXXX0005

5 COUNTERPARTY ID CCBFXXXX0083

6 BENCHMARK MIBOR

7 FIXED RATE 7.435

8 NOTIONAL AMOUNT 500,000,000.00

9 TRADE DATE 31-Aug-07

10 EFFECTIVE DATE 03-Sep-07

11 TERMINATION DATE 03-Sep-12



12 MTM VALUE * (14,045,334.13)

13 PV01 VALUE * 97,053.37

14 DEALER ID D1

15 % OF CANCELLATION 100%

16 REMARKS Fully Terminated

17 TERM TO MATURITY 2.08

18 MTM VALUE OF CANCELLED TRADE (14,045,334.13)

19 MTM VALUE OF REMAINING TRADE 0.00

20 PV01 OF CANCELLED TRADE 97,053.37

21 PV01 OF REMAINING TRADE 0.00

22 NOTIONAL AMOUNT FOR CANCELLED TRADE 500,000,000.00

23 NOTIONAL AMOUNT FOR REMAINING TRADE 0.00

*Values used for Trade Tear up

Partially Terminated

Sr.

No Field Name Sample Value

1 VALUATION DATE 04-Aug-10

2 TRADE ID 200709141000483

3 PAY_FIX / REC_FIX PAY_FIX

4 MEMBER ID CCBFSCBL0036

5 COUNTERPARTY ID CCBFBARC0081



6 BENCHMARK MIBOR

7 FIXED RATE 7.15

8 NOTIONAL AMOUNT 640,000,000.00

9 TRADE DATE 26-Sep-06

10 EFFECTIVE DATE 27-Sep-06

11 TERMINATION DATE 27-Sep-16

12 MTM VALUE 782,196.56

13 PV01 321,146.82

14 DEALER ID D1

15 % OF CANCELLATION 22.57%

16 REMARKS Partially Terminated

17 TERM TO MATURITY 6.15

18 MTM VALUE OF CANCELLED TRADE 176,579.96

19 MTM VALUE OF REMAINING TRADE 605616.60

20 PV01 OF CANCELLED TRADE 72,498.52

21 PV01 OF REMAINING TRADE 248648.30

22 NOTIONAL AMOUNT FOR CANCELLED TRADE 144,479,253.43

23 NOTIONAL AMOUNT FOR REMAINING TRADE 495,520,746.57

*Values used for Trade Tear up



5. Important Dos and Donts to be kept in mind during the exercise

i. Once you have intimated the trades to be considered by CCIL as eligible for compression

(refer Chapter 1, para 2 and 7), please DO NOT report any bilateral early terminations i.e

Reversals for such trades.

ii. Please ensure that you send the same file back to CCIL after updating only those fields

marked for member updation by CCIL.

iii. Please do not create another file or change the features of the file such as file protection

or the file password.

iv. Please do not re-name any sheet in the excel files or insert or delete any sheets.

v. Please do ensure that the PV01 buckets are in the specified format i.e. 00.00-00.00 and

NOT in any other format

vi. In case you have only one Dealer or in case you do not desire to have dealer level

tolerances (refer Chapter 1, para 2 and 7), then you are not to enter the Dealer level

tolerances.

vii. Please do provide CCIL the Names, Email IDs, Landline numbers and cell phone

numbers of all officials at your end who will be participating in the exercise and who

should be marked on mails pertaining to the Compression exercise including passwords

to the excel files.

viii. Please do provide CCIL with the name and contact details of the Treasury Head /

Authorised signatory at your end who will confirm the Acceptance / rejection of the

results and arrange to fax / email scanned copies of their specimen signatures.

ix. The exchange of files between CCIL and the members will be through a specially

designed feature in CCILs Report Browser. Please provide CCIL with the names of 2

officials who will be authorized to access the Reports browser to download the files sent

by CCIL and upload the response files from your end. We will then provide you with a

User name and password for these official.



6. Important Contact Details of CCIL officials

S No Name Department Email ID

Land Line Number

Mobile Number

1 S Roy Chief Risk Officer

Risk Management [email protected] 66639321 9820418317

2 Nandan Pradhan Risk Management [email protected] 66639324 9920533351

3 Ashlesh Chaudhari


4 Milan Borad Risk Management [email protected] 66639327 9892601774

5 Gautam Chatterjee


20


Strictly Confidential

Annexure I

Illustration for calculating increase in Counterparty-wise exposures

Analysis of Counterparty-wise exposures of Member 10 w.r.t its four counterparties before and after Compression

Member 10 Member 1 Member 2 Member 3 Member 4

A. Tolerance for change in counterparty-wise exposure 20,000 20,000 20,000 20,000

B. Net MTM value of all trades with the counterparty before Compression # 1,00,000 -1,00,000 1,00,000 -1,00,000

C. Net MTM value of all trades with the counterparty after Compression # 1,15,000 -85,000 70,000 -1,50,000

D. Adverse change in counterparty exposure [ D = C - B ] 15,000 15,000

Favourable Change in Exposure

Favourable Change in Exposure

Is there a breach in tolerance ? NO NO Not Applicable Not Applicable

Remarks for Member 10

MTM receivable has increased within the tolerance defined

MTM payable has decreased within the tolerance defined

MTM receivable has decreased - counterparty exposure has reduced

MTM payable has increased - counterparty exposure has reduced

# Positive value indicates receivables by members

21


Strictly Confidential

Annexure II: Settlement scenarios

S

No. Scenario

Daily

settlement

amount

Trade Tear UP

Reversal Amount

Amount pre-funded by

participants having a net

payable on account of

compression

Debit/Credit to

member's a/c

1

Daily settlement Payable position + Trade Tear

Up Payable Position = Final Net Payable Position -150 -75 -75 -150

2


Up Receivable Position = Final Net Payable

Position -150 75 0 -75

3


Up Receivable Position = Final Net Receivable

Position -150 200 0 50

4

Daily settlement Receivable position + Trade Tear

Up Receivable Position = Final Net Receivable

Position 150 75 0 225

5


Up Payable Position = Final Net Payable Position 150 -200 -200 150

6


Up Payable Position = Final Net Receivable

Position 150 -75 -75 150

Note: Negative indicates Payable (Debit amounts)

portfolio compression user guide july2011

Documents

jul11 ccil

jul11 members

jul11 data

jul11 test run

d1 members

outstanding trades

mtm values

portfolio compression