The Singapore Exchange (SGX) has proposed changes to allow its clearing members to process OTC derivatives amongst a number of new measures.
Singapore Exchange - Derivatives Clearing (SGX-DC), the exchange's derivatives clearing arm, the will enable clearing members to clear OTC derivatives for their customers. SGX members were previously only able to clear proprietary OTC transactions.
The exchange also proposed reducing the minimum share capital for becoming a client clearing member with SGX-DC, from S$1 billion to S$50 million.
SGX would become Asia’s first exchange to offer client clearing of OTC derivatives if the changes go ahead, with other proposals put forward including the introduction of an enhanced customer collateral protection model to ensure margin is not used in the event of a default of other customers.
These changes were proposed in a SGX consultation paper released on Wednesday, and the exchange will welcome comments until 24 October.
Regulators in Europe – via the European market infrastructure regulation – and the US – via the Dodd-Frank Act – have moved to push trading of OTC derivatives through exchanges and central counterparties.
SGX-DC began clearing proprietary OTC transactions of clearing members in November 2010 and around S$300 billion in notional value of interest rate swaps has been cleared since then.
Meantime, SGX began offering trading in the MSCI Indonesia Index Futures Contract to US traders through its direct access terminals as of Tuesday this week, after receiving clearance from the Commodity Futures Trading Commission’s Division of Market Oversight.