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Practice Note 7A.01A.2B.2 — Apportionment and application of Clearing Fund Contributions when one or more auctions are held in respect of a Contract Class
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  Versions
(1 version)
 
Jul 17 2019 onwards

Practice Note 7A.01A.2B.2 — Apportionment and application of Clearing Fund Contributions when one or more auctions are held in respect of a Contract Class

Issue Date Cross Reference Enquiries

Added on 17 July 2019.

Clearing Rules 7A.01A.2C, 7A.01A.2D and 7A.01A.2E Please contact:

Risk Management
E-Mail Address : rmd@sgx.com

1. Introduction

1.1. This Practice Note illustrates the apportionment and application of Clearing Fund Contributions when one or more auctions are held in respect of a Contract Class. For the purposes of this Practice Note, the Contract Class specified in Rule 7A.01A.5.a, which comprises of (i) contracts that are listed for trading on the Exchange or Relevant Market and (ii) Non-Relevant Market Contracts, will be referred to as the "ETD and NMC Contract Class", the contracts collectively as "ETD and NMC Contracts", the Contract Class and an auction held in respect of this Contract Class as an "ETD and NMC Auction".
1.2 This Practice Note describes:
i. the apportionment of the Clearing House First Loss Contribution, Clearing House Intermediate Contribution, and the Clearing Fund Deposit of each Clearing Member, where one or more ETD and NMC Auctions are held pursuant to Rules 7A.01A.2C.2, 7A.01A.2D.2, and 7A.01A.2E.2; and
ii. the use of Required Participants' Clearing Fund Deposits based on their bidding behaviour in an ETD and NMC Auction, pursuant to Rule 7A.01.2D.2.

2. Apportionment of Clearing House First Loss Contribution and Clearing House Intermediate Contribution to auctions held in respect of the ETD and NMC Contract Class

2.1 For each ETD and NMC Auction, the Clearing House First Loss Contribution and Clearing House Intermediate Contribution shall be apportioned to that auction, based on the proportion of the notional value of the Auction Portfolio vis-à-vis the aggregate notional value of the defaulted Clearing Member's contracts in the ETD and NMC Contract Class.

3. Apportionment of a Required Participant's Clearing Fund Deposit to an ETD and NMC Auction

3.1 For each ETD and NMC auction, the Clearing Fund Deposit of each Required Participant shall be further apportioned to that auction based on the proportion of the notional value of the Required Participant's contracts that are the same as those in the Auction Portfolio vis-à-vis the aggregate notional value of all of that Required Participant's contracts in the ETD and NMC Contract Class.

4. Illustration of how the Clearing Fund Deposits of Required Participants who have submitted bids for an ETD and NMC auction are pro-rated pursuant to Rule 7A.01A.2D.2

4.1 This section illustrates how Required Participants' Clearing Fund Deposits are pro-rated pursuant to Rule 7A.01A.2D.2.
4.2 Pursuant to Rule 7A.01A.2D.2, where an ETD and NMC auction is held, the Clearing Fund Deposits of all Required Participants apportioned to that auction will be applied to meet losses arising from or in connection with that auction, in the following order of priority and manner, with each level to be exhausted before the next level is applied:
a. first, the apportioned Clearing Fund Deposits of Required Participants who did not participate in the auction;
b. second, the apportioned Clearing Fund Deposits of Required Participants who had submitted bids that were below the Winning Bid Price, which will be applied on a pro-rata basis based on the product of:
i. the distance between such Required Participant's bid price and the Winning Bid Price; and
ii. the apportioned Clearing Fund Deposit of such Required Participant;
c. third, the unused apportioned Clearing Fund Deposits of Required Participants who had submitted bids that were below the Winning Bid Price, that was not applied in (b);
d. fourth, the apportioned Clearing Fund Deposits of Required Participants who had submitted the Winning Bid Price.
4.3 The following example illustrates Rule 7A.01A.2D.2.b.

A and B are Required Participants who had submitted bids that were below the Winning Bid Price. Their liabilities under Rule 7A.01A.2D.2.b will be in the following proportions: