SGX takes securities margining to the streets
30 July 2012 Singapore
Image: Shutterstock
Singapore Exchange (SGX) is consulting the public on proposed rules to introduce margining for securities cleared by the Central Depository (CDP).
SGX stated that the proposed margin framework will, “reinforce CDP’s position as a safe, efficient and transparent venue for participants to conduct business,” mentioning that it will also align CDP’s practices with new international standards established by the Committee on Payment and Settlement Systems (CPSS) and the International Organization of Securities Commissions (IOSCO) for central counterparties in April 2012.
“At present, CDP maintains a Clearing Fund, comprising contributions from CDP and its members, that covers losses that may arise from the liquidation of a defaulting member’s positions,” stated SGX.
“With the proposed margin framework, CDP will hold additional financial resources from individual members which are available to meet their obligations in the event of their own default. If the margins are insufficient, the remaining losses will be covered by the Clearing Fund.”
The key features of the proposed margin framework are that margins will be imposed on a member’s portfolio of outstanding securities transactions, and member’s margin requirement must be met by its own funds, and will be calculated using a single margin rate.
In its public consultation, SGX is seeking views on the proposed rules relating to the margin framework, including the methodology for maintenance margin and the determination of the margin rate.
Separately, SGX will also be consulting the public on other refinements to its clearing rules over the next few months to achieve closer alignment on other aspects of securities and derivatives clearing with the CPSS-IOSCO standards.
SGX stated that the proposed margin framework will, “reinforce CDP’s position as a safe, efficient and transparent venue for participants to conduct business,” mentioning that it will also align CDP’s practices with new international standards established by the Committee on Payment and Settlement Systems (CPSS) and the International Organization of Securities Commissions (IOSCO) for central counterparties in April 2012.
“At present, CDP maintains a Clearing Fund, comprising contributions from CDP and its members, that covers losses that may arise from the liquidation of a defaulting member’s positions,” stated SGX.
“With the proposed margin framework, CDP will hold additional financial resources from individual members which are available to meet their obligations in the event of their own default. If the margins are insufficient, the remaining losses will be covered by the Clearing Fund.”
The key features of the proposed margin framework are that margins will be imposed on a member’s portfolio of outstanding securities transactions, and member’s margin requirement must be met by its own funds, and will be calculated using a single margin rate.
In its public consultation, SGX is seeking views on the proposed rules relating to the margin framework, including the methodology for maintenance margin and the determination of the margin rate.
Separately, SGX will also be consulting the public on other refinements to its clearing rules over the next few months to achieve closer alignment on other aspects of securities and derivatives clearing with the CPSS-IOSCO standards.
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