## Seed Digital Commodities Market

Margin requirements per instrument are calculated at the end of each day. To make an assessment of a product's risk profile, Seed Digital Commodities Market ("SCXM") reviews the previous 500 days' price movements to generate a volatility measure. SCXM then uses this volatility measure in a 5-day Value-at-Risk ("VaR") model, with a 99% confidence interval. That is, SCXM calculates a margin requirement to cover what it expects a potential loss to be over a 5-day interval, with 99% confidence and a 500-day look-back.

The VaR model generates a percentage value of notional that is at risk of loss, and therefore must be set aside as collateral by the participant. Each digital asset product is subject to a minimum required margin percentage. Please see our current margin requirements. SCXM takes the larger of the 5-day VaR percentage and the minimum margin floor percentage.

Finally, the percentage value determined as the maximum of the 5-day VaR and the margin floor is multiplied by the Zero Hash Daily Index and the size of the instrument, to calculate the static margin requirement for the trading day.

For example, assume the settlement price for BTC/USD is $3,900, the contract size is 1 and the 500-day look-back volatility for BTC/USD is 28%.

**Note:** SCXM rounds all margin amounts up to the nearest appropriate number to smooth margin requirements from day to day.

**Instrument Initial Margin = roundup [max (VaR, Margin Floor) x Settlement Price x Contract Size]**

= roundup [max (28%, 30%) x $3,900 x 1]

= roundup [30% x $3,900]

= roundup [$1,170]

= $1,200

## Seed SEF

The margin methodology for products traded on Seed SEF will be released closer to launch.