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Risk Management System

Market confidence is essential for risk free investment by clients and this confidence is only built-up by implementing streamline settlement system and coverage of failed trades. Like other developed capital markets around the globe, stringent risk management regime is applicable in the Capital Markets of Pakistan.

The National Clearing Company of Pakistan Limited (“NCCPL”) was performing the risk management of for trades/transactions of Ready and Futures Market executed by its Non-Broker Clearing Members (NBCMs) through Financial Institutions Risk Management System (FIRMS). Moreover, risk management functions for trades which are recorded in debt & leverage markets by all clearing members were also performed by the NCCPL.

With the promulgation of Securities Act, 2015 “the Act”, the NCCPL has been assumed the role of a Central Counter Party whereby it interposes between transacting counter-parties – a seller vis-à-vis the original buyer and a buyer vis-à-vis the original seller – to guarantee execution of the transactions by acting as CCP and has established a well funded and liquid Settlement Guarantee Fund.

In accordance with the provision of the Securities Act, 2015, the NCCPL has taken over the entire risk management functions of the capital market trades that are executed and settled by the Clearing Members.

Following Risk Management Components are performed by the NCCPL:

  • Exposure margins & MtM losses management
  • Client level margining regime
  • Monitoring & maintenance of capital adequacy requirement
  • Monitoring of position limits
  • Collateral management

Value-at-Risk (VaR) Estimates methodology is applied to determine scrip-wise margins based on liquidity and volatility. Special Margins, Concentration Margins and Mark-to-Market (MTM) Losses are also collected by NCCPL applicable for respective market. Other risk management measures such as Capital Adequacy Limit and Position Limits (Market-wide, Member-wide and Client-wide) are also implemented by NCCPL.


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