Risk Management

Risk management at IIBX is designed to preserve market integrity, strengthen settlement certainty and support orderly market functioning across trading, clearing and settlement activities.
The framework combines:
    •   Pre-trade risk controls
    •   Advance settlement mechanisms
    •   Margin-based risk management
    •   Daily settlement processes
    •   Settlement guarantee arrangements
    •   Default management procedures
    •   Monitoring and surveillance mechanisms
The risk architecture is tailored separately for Spot Contracts and Futures Contracts to reflect their distinct settlement and exposure characteristics.

Institutional Risk Architecture

Qualified Central Counterparty (QCCP)
IIBX has been granted the status of a Qualified Central Counterparty (QCCP).
QCCP recognition reflects adherence to internationally accepted standards relating to central counterparty risk management and market infrastructure.
The QCCP framework strengthens confidence in the Exchange’s clearing and settlement architecture by supporting:
    •   Robust risk governance
    •   Enhanced capital efficiency
    •   Strengthened counterparty risk controls
    •   Resilient settlement infrastructure
    •   Internationally aligned market practices

Settlement Guarantee Fund (SGF)
To further strengthen settlement assurance and market confidence, IIBX maintains a Settlement Guarantee Fund (SGF). The Settlement Guarantee Fund acts as an additional layer within the overall risk management framework and supports orderly management of settlement obligations.
The SGF framework is designed to:
    •   Support settlement continuity
    •   Manage residual settlement risk
    •   Strengthen participant confidence
    •   Enhance financial resilience of the market
The Settlement Guarantee Fund operates alongside other risk management measures including advance pay-ins, margins and default procedures.

Spot Market Risk Framework

The Spot Market operates on a pre-funded and pre-delivered settlement model, where settlement risk is substantially mitigated before execution of trades.
Risk management is achieved through advance fulfilment of obligations by market participants.

Core Risk Philosophy

Early Pay-in Based Risk Management
The primary risk control mechanism in Spot Contracts is:

Early Pay-in of BDRs and Funds
Participants fulfil settlement obligations upfront before orders are permitted into the market. This approach reduces counterparty exposure and supports efficient settlement completion.

T+0 Spot Contracts

Seller Risk Controls
Sellers are required to make: 100% advance pay-in of BDRs before placing sell orders. This ensures full availability of underlying bullion.

Buyer Risk Controls
Buyers are required to make: 100% advance pay-in of funds before placing buy orders. This ensures immediate settlement readiness.

T+2 Spot Contracts

Seller Risk Controls
Sellers are required to make: 100% advance pay-in of BDRs before placing sell orders.

Buyer Risk Controls
Buyers are required to make: advance pay-in of funds in accordance with the percentage prescribed under contract specifications. This structure balances settlement assurance with participant flexibility.

Spot Market Risk Controls
The Spot framework includes:
    •   Advance Pay-in Controls
    •   Settlement Monitoring
    •   Exposure Controls
    •   Eligibility Validation
    •   Operational Risk Monitoring

Spot Risk Objectives
    •   Minimize settlement failures
    •   Reduce counterparty exposure
    •   Support settlement certainty
    •   Enable efficient market operations

Futures Market Risk Framework

The Futures Market operates through a margin-based risk management framework designed to manage market exposure throughout the contract lifecycle.
The framework combines:
    •   Margin collection
    •   Exposure controls
    •   Daily settlement
    •   Default safeguards
This enables continuous management of market and settlement risk.

Margin Architecture
      VaR-Based Initial Margin : Initial Margin is collected using a Value at Risk (VaR)-based methodology. The VaR model estimates potential adverse market movement over a defined confidence interval and risk horizon. The objective is to ensure adequate financial protection against market exposure.

      Minimum Period of Risk (MPoR) : MPoR represents the minimum period assumed to manage and liquidate positions under stressed conditions.
Incorporating MPoR strengthens resilience and supports prudent margin determination.
      Margin Components : The Exchange may apply multiple layers of margin controls.
      Initial Margin : Protection against normal market movement.
      Additional Margin : Applied during elevated market volatility.
      Special Margin : Applied under contract-specific or exceptional circumstances.
      Concentration Margin : Applied to address concentrated exposures and position risk.
      Other Prescribed Margins : Additional controls may be introduced under Exchange rules where required.

Daily Mark-to-Market (MTM) Settlement

Continuous Settlement of Market Exposure Final settlement risk in Futures Contracts is managed through:
      Daily Mark-to-Market (MTM) Settlement :Open positions are revalued periodically using settlement prices.Resulting gains and losses are settled on daily basis.
Benefits of Daily MTM
    •   Continuous realization of exposure
    •   Prevention of risk accumulation
    •   Faster loss recognition
    •   Stronger settlement discipline

Exposure Monitoring Framework
The Exchange continuously monitors:
    •   Margin Adequacy
    •   Position Exposure
    •   Participant Concentration
    •   Contract Risk
    •   Settlement Obligations
    •   Market Conditions