Margin Methodology

Nodal Clear employs an expected shortfall methodology for its initial margin calculations. The calculation is calibrated to cover an expected loss to a 99.5% confidence level.

All margin calculations are conducted at the portfolio level. As inputs to the portfolio calculation, Nodal Clear’s margin methodology employs return observations from recent trading activity (past one to three years) and return observations from periods specifically selected by the Nodal Clear risk team as periods exhibiting a particular stress scenario. Antitheticals for all return observations are calculated, so in total the model relies on over 1,000 return observations.

Nodal Clear’s initial margin methodology also incorporates a liquidity risk component to cover the liquidation cost of a given portfolio. The liquidity risk component produces increased margins for positions with lower market liquidity and/or that represent a large share of the overall market open interest.

Additional information on the Nodal Clear margin model can be obtained by contacting Clearing Services below or at (703) 962-9861.