5.1.7 Pre-Netting for Variation Margin

User can select the list of Margin accounts, linked to the selected scheme, for which net margin transaction is initiated for the purposes of Variation Margin.

The details that can be captured for Variation Margin pre-netting include,

• Module, Agreement or Portfolio and Margin Code for which pre-netting would be initiated
• Margin Accounts linked to the selected Scheme and Agreement or Portfolio
• Profit-Loss balance as per the Counterparty’s statement
• Settlement Amount to be transferred as net variation margin

User can view the details for,

• Account currency and Current Unrealized PL balance in the Margin account
• Exchange rate to be used when Account currency is different from the Settlement Currency
• Transfer Amount and Transfer Action as Pay or Receive

On click of Load All Accounts button, all variation margin accounts linked to the selected scheme, module and Agreement or Portfolio (as selected) would be automatically identified. The details for the net margin required for the deals linked to each Margin account identified are automatically populated in ‘Variation Margin’ tab.

• User can choose to remove the Margin accounts for which pre-netting need not be initiated as part of this transaction
• Can edit the Statement PL Balance for each record

Click the Variation Margin tab of the Cash-Margin Netting Initiation Process (MGDCMINI) function to open this screen.

Figure 5-4 Cash-Margin Netting Initiation Process – Variation Margin

The following table describes the fields captured for initiating pre-netting transaction for Variation Margin.

* Indicates mandatory fields.

Table 5-4 Cash-Margin Netting Initiation Process – Variation Margin

Field	Description
Module	Displays the module of the deal(s) for which pre-netting of margin is initiated. Same as the Module (if) selected in the header This field cannot be amended after saving the pre-netting transaction
Agreement/Portfolio	Displays the Agreement or Portfolio for which pre-netting is initiated for the net margin required for the deals linked. Same as the Agreement or Portfolio (if) selected in the header This field cannot be amended after saving the pre-netting transaction Only those active Agreements with the selected party, available for the current branch, enabled for the Module and having Expiry Date >= Process date of the pre-netting, is displayed for selection Only those active portfolios for the Module, available for the current branch and customer portfolios for the selected Party (if available), is displayed for selection Applicable only for Securities, Exchange Traded Derivatives and Credit Derivatives modules in which portfolios can be defined separately
Margin Code	Displays the Margin Code defined for the selected Agreement and Variation Margin Type. This field cannot be amended after saving the pre-netting transaction Defaulted to the active Margin Code defined for Variation Margin type in the selected Agreement When Portfolio is selected, set to ‘Variation Margin’ by default
Account No	Displays the Margin Account for which pre-netting is initiated for the net variation margin required for the deals linked. This field cannot be amended after saving the pre-netting transaction Only those Margin Accounts Linked to the selected Scheme and configured for Variation Margin Type and Agreement or Portfolio is displayed for selection
Account CCY	Displays the currency of the selected Margin Account. Example: Account CCY = ‘USD’
Unrealized PL Balance (Cr/-Dr)	Displays the current Unrealized PL balance in the Margin Account before this pre-netting transaction. Amount displayed is positive when the account has a Credit balance, implying that the bank has Unrealized Profit receivable from the counterparty Example: Unrealized PL Balance (Cr) = USD 5,000 Amount displayed is negative when the account has a Debit balance, implying that the bank has Unrealized Loss payable to the counterparty Example: Unrealized PL Balance (Dr) = USD -3,000 User can click on ‘Refresh Balances’ button to update the current PL balance displayed for all the margin accounts available in the ‘Variation Margin’ tab.
Additional PL	Displays the net movement in Profit-Loss, in Account CCY, posted for all the Linked Deals as of the Process Date. Both Revaluation and Realized PL entries posted for that date are netted for all Linked Deals having the same Variation Margin Account and linked to the selected Agreement or Portfolio Example: Additional PL = USD - 8,000
Statement PL Balance	User to enter the net MTM PL balance in Account CCY as mentioned in the Counterparty’s statement, for the selected Variation Margin Account applicable for the selected Agreement or Portfolio. Example: Statement PL = USD - 8,500 If not specified, then Sum of Unrealized PL Balance and Additional PL is set by default
Settlement Amount	Displays the Net amount in Account CCY to be transferred for Variation Margin, as of the Process Date. Displays the difference between the Statement PL Balance and (Current) Unrealized PL Balance, by default Example: Settlement Amount = Statement PL Balance - Unrealized PL Balance, = -8,500 - 5000 = USD - 13,500 However, User can edit the settlement amount if required to match the margin call amount as per the statement If the amount displayed is negative, then bank needs to pay the additional loss If the amount displayed is positive, then bank needs to receive the additional profit
Fx Rate	Displays the exchange rate to be used when Account CCY is different from the Settlement Currency of the Scheme. Example: If Account ccy = ‘USD’ and Settlement currency = ‘GBP’, then Fx Rate = 0.79 When Account CCY is same as the Settlement Currency, then Fx Rate = 1
Transfer Amount	Displays the Net Variation Margin to be transferred in Settlement Currency. Transfer Amount is displayed as an absolute value without sign When Account CCY is different from the Settlement Currency, then Settlement Amount is converted to Transfer Amount using the Fx Rate Example: Transfer Amount = ABS(Settlement Amount) * Fx Rate = ABS(- 13,500) * 0.79 = GBP 10,665 When Account CCY is same as the Settlement Currency, then Transfer Amount = Settlement Amount
Transfer Action	Displays the direction of the Net Variation Margin to be transferred. If the Settlement amount displayed is negative, then Transfer Action is set to ‘Pay’ Example: If Settlement Amount = -13,500 then Transfer Action = ‘Pay’ If the Settlement amount displayed is positive, then Transfer Action is set to ‘Receive’
User Comments	Enter any additional comments for the net variation margin transfer for the selected Margin Account. A maximum of 100 characters can be entered
Netting ESN	Displays the accounting event sequence number for the accounting entries posted for the net variation margin transfer.

• View Linked Deals for Variation Margin