OSLO (Reuters) – Risk levels in Nasdaq’s (NDAQ.O) Nordic commodities market had more than doubled in the six months prior to a top trader’s default in November, the result of a rapid accumulation of bets amid soaring electricity prices, the exchange told Reuters. Nasdaq conducts daily stress tests calculating market risk, adjusting every quarter a member-funded buffer to shield the market from breaking down in case of defaults like the one that caused a 114 million euro ($132 million) loss in September. But the stress tests, which are not made available to traders, may be insufficient, some of them told Reuters, asking for more transparency and better risk control. On March 1, the default fund amounted to just 74 million euros. Had the level stayed unchanged, Einar Aas, the trader who defaulted, would have hit the market with a loss the buffers couldn’t match, triggering a deeper crisis. Seeing higher risk levels, Nasdaq on June 1 increased clearing members’ default fund requirement to 133 million euros, and on Sept. 1 upped it again to 166 million euros. These were the only two occasions on which members were warned of the increased risk Nasdaq identified prior to the default, aside from… continue reading
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Source: CTRM Center