The Singapore Exchange (SGX) is proposing to introduce new margining rules for securities cleared by its Central Depository (CDP).
The proposed margin framework seeks to align CDP’s practices with new international standards established by the Committee on Payment and Settlement Systems (CPSS) and the International Organisation of Securities Commissions (IOSCO) for central counterparties.
CDP presently maintains a clearing fund comprising contributions from CDP and members. This fund covers losses which arise from the liquidation of a defaulting member’s position.
Under the proposal, CDP will hold additional financial resources from individual members and if margins are insufficient, the remaining losses will be covered by the clearing fund. Margins will be imposed on a member’s portfolio of outstanding transactions and those of their customers. The exchange said margin payments will vary based on the risk the portfolio of trades bring to the clearing system.
A member’s margin requirement must be met by its own funds.
Consultation with the public will run until 21 August.