Overview
Breaching a hard position limit when trading derivatives is strongly discouraged. Breaches can result in both penalties and fines for offenders. However, under special circumstances, firms can secure an agreement with exchanges and regulators to override these limits, subject to the exemption rules set out by the exchange or regulator.
Creating Hedge Exemptions
Once an exemption is secured, monitoring the new limit manually can become error-prone. That's why we built Exemptions, a feature within our Position Limits service that:
Let's you override and customise your limit values
Shows the status of active and deactivated exemptions in the system
Keeps all the information relating to a specific exemption in one place
Having this information readily accessible is key to remaining compliant. Follow the steps below to set up a hedge exemption.
Steps to Create a Hedge Exemption:
Step 1: Go to Monitoring > Position Limits and select Exemptions.
Step 2: Click Add new to start creating a hedge exemption.
Step 3: Create the hedge exemption by filling in the required fields.
Step 4: After creating the exemption, rerun your file to apply the exemption.
Step 5: Verify that the exemption has been applied to the result.
Verifying the Exemption
We can verify that the exemption has been applied to the result by checking whether the Current Limit is highlighted in blue. If you hover over this, it should display "Hedge Exemption."
Important: The exemption will apply to future results. Please re-run the file to apply the exemption results that were already generated. After the exemption is used to generate results, it can only be deactivated.