The Dubai Commodities Clearing Corporation (DCCC), a wholly owned subsidiary of the Dubai Gold and Commodities Exchange (DGCX) has announced the launch of a state-of-the-art risk management system, called ActiveRisk.
Developed by Chella Software, ActiveRisk has been deployed by DCCC with the primary objective of enhancing its regulatory compliance in line with the Principles for Financial Markets Infrastructure (PFMI) standards and also ESMA, European Securities and Markets Authority, technical standards under European Market Infrastructure Regulation, EMIR.
The key feature of ActiveRisk is to identify the aggregate counterparty credit risk during default scenarios, while also verifying adequacy of liquidity resources in a market stress condition with the identification of material impacts of tail events on clearing member and customer exposure.
With the enhanced system in place, DCCC will conduct stress tests on a daily basis to effectively measure its resilience against the default of its top clearing members and its corresponding cascading impact. Reverse stress testing will challenge the resilience of the DCCC liquid resources under stressful scenarios. This will help DCCC in not just determining the appropriate margin requirements, but also better gauge short-term liquidity challenges amidst adverse price movements.
“At DGCX, we firmly believe in stronger risk management norms for the safety of our markets. Whilst continuing to enhance efficiencies in our systems and processes by deploying the latest technology so that our members and their clients can trade with confidence,” said Gaurang Desai, CEO of DGCX. “As we significantly step-up our operational standards to adhere to IOSCO and other regulatory requirements, we are also aware that advancement in risk management is the need of the hour. The implementation of ActiveRisk is a vital step towards elevating DCCC’s risk management practices.”
