Description of the case
In March 2020, European energy markets struggled with very high volatility caused by the impact of the SARS-CoV-2 virus pandemic on the economy. Extreme price movements on the Polish market were observed in the period starting from 16 March 2020, i.e. after the decision on the introduction of the lockdown in Poland. In connection with the strong negative movement in prices and their impact on the amount of the required variation margin collateral, liquidity pressure arose for the Clearing House Member holding long net positions in forward contracts.
Following the receipt of information from one of the Clearing House Members that it would not be able to pay its transaction liabilities when due, IRGiT made a prompt decision to announce an Event of Default and to close all open positions. The positions were closed directly on the market, while ensuring high standard and efficiency of the process.
Utilization of Guarantee Fund resources
In connection with extreme price movements on the forward market, funds paid by the Clearing House Member before the Event of Default was announced were not sufficient to cover all losses. Considering the above, acting pursuant to the Regulations of the Exchange Clearing House (Commodity Market), the pre-condition for using resources of other Clearing House Members paid into the Guarantee Fund has been fulfilled. At the same time, IRGiT promptly took all the measures aimed at minimizing the losses and enforcing repayment of all liabilities by the insolvent Clearing House Member. Ultimately, on 1 April 2020, IRGiT used 2.07% of all the funds paid into the Guarantee Fund.
Reimbursement of funds used
Acting for the benefit of Clearing House Members, IRGiT took the relevant measures in order to recover the utilized Guarantee Fund resources. Ultimately, on 10 December 2020, all the funds were returned to the Clearing House Members, whose contributions had been used.
Below we present the wording of all the operating reports, minutes, presentations and other materials pertaining to the process described above.