In an effort to improve its risk management practices and strengthen the integrity of its derivatives clearing system, the Singapore Exchange (SGX) is looking to enhance its default management framework for exchange-traded and over-the-counter (OTC) derivative contracts.
The proposed enhancements to Singapore Exchange Derivatives Clearing (SGX-DC) rules include introducing a mechanism to limit SGX clearing members' default management liabilities, as well as changes to the way its clearing fund will be used in default scenarios.
The exchange is also looking to make refinements to the default management framework and provide greater clarity on procedures.
SGX said the proposals were in response to global regulatory reforms towards the centralised clearing of OTC derivatives.
“In particular, the possible increase in concentration risk in CCPs has raised the need for CCPs to provide a comprehensive default management framework to cater for the remote but plausible event of several clearing members' defaulting in quick succession,” an announcement from SGX said.
A consultation paper which details the enhanced default management framework for SGX-DC is open to public comment until 3 October 2011.
SGX recently signed its first Chinese derivatives trading member, GF Futures (Hong Kong), in August 2011.