Rulebooks: Contents

Rulebooks
Mainboard Rules
Catalist Rules
SGX-ST Rules
CDP Clearing Rules
CDP Settlement Rules
DVP Rules [Entire Rulebook has been deleted]
CDP Depository Rules
Futures Trading Rules
SGX-DC Clearing Rules
Chapter 1 Application of Rules
Chapter 2 Clearing Membership
Chapter 3 Committees
Chapter 4 Enforcement of Rules
Chapter 5 Arbitration
Chapter 6 Delivery and Related Matters
Chapter 7 Clearing and Margins
Chapter 7A Suspension and Default
Chapter 7B Payments
Chapter 8 Mutual Offset System
Chapter 9 Definitions and Interpretation
Chapter 10 Transitional Provisions
Directives
Practice Notes
Practice Note 2.28A.1.6 — Conflicts of Interest
Appendices
Schedules
SIAC DT Arbitration Rules
SIAC DC Arbitration Rules
Archive
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  • Practice Notes

    • Practice Note 2.13A — Business Continuity Requirements

      Issue Date Cross Reference Enquiries
      Added on 22 January 2009 Rule 2.13A Please contact Member Supervision:

      Facsimile No : 6538 8273
      E-Mail Address: membersup@sgx.com

      1. Introduction

      1.1 Rule 2.13A requires Clearing Members to:
      (i) maintain adequate business continuity arrangements;
      (ii) document business continuity arrangements in a business continuity plan;
      (iii) test and review business continuity plans regularly; and
      (iv) appoint emergency contact persons.
      1.2 The objective is to ensure that Clearing Members have the ability to:
      (i) React swiftly to emergency situations; and
      (ii) Maintain critical functions and fulfill obligations to customers and counterparties in the event of major operational disruptions.

      2. Business Continuity Plan

      2.1 Critical Elements of a Business Continuity Plan

      Rule 2.13A.1 requires Clearing Members to Clearing Members to maintain adequate business continuity arrangements, and document such arrangements in a business continuity plan. As a guide, a Clearing Member's business continuity plan should document the following elements:
      (i) Risk assessment: This includes a comprehensive assessment of business continuity risks (including financial and operational risks) and threat scenarios which may severely disrupt a Clearing Member's operations. Such scenarios may include prolonged power outages, IT system software or hardware failures, loss of voice or data communication links, acts of terrorism, and outbreak of infectious diseases;
      (ii) Business impact analysis: This is an evaluation of the impact of the risks and threat scenarios identified in (i) above. The business impact analysis should identify critical business functions (including support operations and related information technology systems) and potential losses (monetary and non-monetary) to enable the Clearing Member to determine recovery strategies/priorities and recovery time objectives;
      (iii) Work area recovery: This refers to continuity arrangements for a Clearing Member's critical functional capabilities in the event that the Clearing Member's primary office becomes inaccessible, for example, availability of a disaster recovery site ready for activation within a reasonable period of time;
      (iv) Crisis communications: This refers to a communications plan for the Clearing Member to liaise with its internal and external stakeholders such as employees, customers and regulatory authorities during a crisis;
      (v) Roles and responsibilities: This refers to the identification of a Clearing Member's key personnel and management staff, their roles and responsibilities, and reporting lines. Alternates should be identified to cover the responsibilities of absent key personnel.
      (vi) Backup for critical functions*, information technology systems and data;

      * Critical functions refer to business functions whose failure or disruption may incapacitate the firm.
      (vii) Key service providers: This refers to assessing a Clearing Member's dependencies on key service providers in recovery strategies and recovery time objectives, and taking steps to ensure that key service providers are capable of supporting the Clearing Member's business, even in disruptions;

      ^ Key service providers refer to third-parties who are performing functions that are not normally carried out by Clearing Members internally, but are critical to the Clearing Member's ability to carry on business operations. For example, IT system hardware/software vendors.
      (viii) Outsourcing service providers#: This refers to assessing whether the service provider has established satisfactory Business Continuity Plans commensurate with the nature, scope and complexity of the outsourced services; and

      # Outsourcing service providers refer to third parties who are performing functions that would normally be performed by Clearing Members internally. For example, Operations and Technology.
      (ix) Any other elements that the Clearing Member deems necessary to be included in its business continuity plan or which the Clearing House may prescribe from time to time.
      2.2 Emergency Response During Crisis
      2.2.1 A Clearing Member should establish and maintain a crisis management plan as part of its business continuity plan. The crisis management plan should include (but not be limited to):
      (i) Emergency response procedures;
      (ii) Roles and responsibilities of the crisis management team;
      (iii) Command and control structures; and
      (iv) Salvage and restoration procedures.
      2.2.2 The Clearing House may declare a wide-area crisis in the event of a major and widespread incident. When such declaration is made, the Clearing House may require a Clearing Member to submit status reports to the Clearing House. A wide-area crisis may include any incident where the operations of a large number of market participants are disrupted simultaneously.
      2.3 Regular Review, Testing and Training
      2.3.1 Rule 2.13A.4 requires a Clearing Member to review and test its business continuity plan regularly. Clearing Members should do so at least once a year to ensure that their business continuity plans remain relevant.
      2.3.2 Where there are material changes to a Clearing Member's business activities and operations, the Clearing Member should update its business continuity plan accordingly. Regular training should be conducted for staff to be updated and aware of any relevant changes to the Clearing Member's business continuity arrangements. As a principle, training should be conducted when:
      (i) changes have been made to the Clearing Member's BCP; and
      (ii) new staff are recruited.
      Clearing Members should also conduct refresher courses for existing staff where appropriate.

      3. Emergency Contact Persons

      3.1 Rule 2.13A.5 requires a Clearing Member to appoint emergency contact persons and furnish the contact information of such persons to the Clearing House. Clearing Members may appoint an emergency contact person and up to two (2) alternates. A template is attached as Appendix A to this Practice Note for the notification of contact information (postal address, email, telephone, mobile telephone and facsimile numbers) to the Clearing House.

      Refer to Appendix A of Practice Note 2.13A.
      3.2 Clearing Members are to ensure that the contact information provided to the Clearing House is updated on a semi-annual basis. Nonetheless, where there are changes to a Clearing Member's emergency contact persons and contact information, the Clearing Member should notify the Clearing House immediately in writing.
      3.3 A Clearing Member's authorized emergency contact person should immediately notify the Clearing House in the event where:
      (i) a Clearing Member's business operations are or will be significantly disrupted; and/or
      (ii) a Clearing Member's business continuity plan is activated.

      • Appendix A to Practice Note 2.13A Business Continuity Management Emergency Contact Person(s)

        Please click here to view Appendix A to Practice Note 2.13A Business Continuity Management Emergency Contact Person(s).

    • Practice Note 2.28A Procedures to Suspend Qualification of a Trading Member

      Issue Date Cross Reference Enquiries
      11 January 2011 Clearing Rules Rule 2.28A.3 and 2.28A.5 Please contact:

      Member Supervision
      Facsimile No : 6538 8273
      E-Mail Address : membersup@sgx.com

      Market Control
      Hotline : 6236 8433

      1 Introduction

      1.1 Rule 2.28A.3 states that a Clearing Member who wishes to suspend its clearing arrangement with a Trading Member, shall notify the Clearing House of its decision to suspend its clearing arrangement with that Trading Member, and comply with any reasonable direction of the Clearing House in relation to the suspension of the clearing of the Trading Member's trades.
      1.2 Rule 2.28A.5 states that the Clearing Member shall clear and settle all the trades of the Trading Member which are done right up to the point when the Trading Member has been disabled from entering trades to be cleared by the Clearing Member.
      1.3 This Practice Note sets out the operational procedures that a Clearing Member should follow to notify the Clearing House of its decision to suspend its clearing arrangement with a Trading Member.

      2 Procedures for Suspending a Trading Member

      Designated Officers

      2.1 Clearing Members shall at all times have at least two Designated Officers whose role is to notify the Clearing House of the Clearing Member's decision to suspend a Trading Member.
      2.2 For each Designated Officer, the Clearing Member shall submit to Market Control the Designated Officer's name, identification number, contact details, and a sealed envelop containing authentication information stipulated by Market Control. (For security reasons, the required authentication information will not be published in this Practice Note. Clearing Members are to contact Market Control regarding the required information.)
      2.3 Clearing Members must promptly update Market Control of changes in Designated Officers, and any changes to a Designated Officer's information.

      Notification of Suspension of Trading Member

      2.4 Once a Clearing Member has decided to suspend a Trading Member, the Clearing Member's Designated Officer shall contact Market Control by telephone during trading hours at the Market Control Hotline, 6236 8433, and notify Market Control of the suspension.
      2.5 Market Control will verify the identity of the caller by requiring the caller to respond correctly to two authentication questions.
      2.6 If the caller is authenticated as the Clearing Member's Designated Officer, Market Control will effect the suspension of the Trading Member. The suspension will be effected within one hour of the authentication of the Designated Officer.
      2.7 SGX will suspend the Trading Member's trading access and cancel all open orders for the suspended Trading Member. Market Control will notify the Designated Officer when this is done.

      Final Traded Position

      2.8 For the purposes of Rule 2.28A.5, the Clearing Member shall accept the Trading Member's final traded position as stated in the trade report produced by SGX.
      2.9 For clarifications, the Clearing Member may call the Market Control Hotline, 6236 8433.

      Added on 11 January 2011 and amended on 15 September 2017.

    • Practice Note 2.28A.1.3 — Pre-Execution Checks

      Issue Date Cross Reference Enquiries
      Added on 15 March 2013 and amended on 14 November 2016. Rule 2.28A.1.3 Please contact Member Supervision:

      Facsimile No : 6538 8273
      E-Mail Address : membersup@sgx.com

      1. Introduction

      1.1 This Practice Note provides further details on the pre-execution checks contemplated in Rule 2.28A.1.3.

      2. Pre-Execution Checks

      2.1 Rule 2.28A.1.3 requires a Clearing Member, in order to clear the trades of a Trading Member, to satisfy the Clearing House that it has in place automated pre-execution credit control checks to monitor the Trading Member's trades and manage its risk exposure to such trades. The purpose of this is to prevent overtrading and for credit risk management purposes. As such, the checks must be appropriately set to effectively limit the firm's risk exposure to Trading Members to prevent the taking on of excessive risk.
      2.2 [This paragraph is deleted.]
      2.3 Clearing Members will be able to meet the requirement in Rule 2.28A.1.3 by using the appropriate Exchange-hosted pre-execution checks, or by directly setting and controlling the appropriate pre-determined automated limits in the Trading Member's system, having automated alerts whenever such limits are altered, and by conducting regular post-execution reviews of trades. Clearing Members should assess and continue to ensure that the pre-execution risk management control checks are robust on an ongoing basis.

      Added on 15 March 2013 and amended on 14 November 2016.

    • Practice Note 2.28A.1.6 — Conflicts of Interest

      Issue Date Cross Reference Enquiries
      Added on 15 March 2013 Rule 2.28A.1.6 Please contact Member Supervision:

      Facsimile No : 6538 8273
      E-Mail Address : membersup@sgx.com

      1. Introduction

      1.1 This Practice Note provides guidance on how front office and back office functions of Clearing Members should be separated, in accordance with Rule 2.28A.1.6.

      2. Separation of Key Functions

      2.1 The purpose of separating a Clearing Member's various key functions is to minimise and manage conflicts of interests among these functions.
      2.2 Examples of proper separation include:—
      (a) the setting and authorising of credit limits on customers by senior management staff who are independent of sales and marketing functions, and are not related to the customer in question; and
      (b) having adequate separation of management responsibilities e.g the heads of sales, dealing or marketing functions should not have responsibilities over the middle and back office functions of Clearing Members.
      2.3 The basis for determining and amending credit limits should be properly documented. Adequate audit trail reports should be maintained to show all changes to credit limits, the date and time of the modifications and the authorised person who approved the changes. In addition, sufficient checks and procedures should be in place to ensure that all limits and parameters set and modified by the credit control administrator are accurate and have been approved.

      Added on 15 March 2013.

    • Practice Note 6.07A — Facilitator Agent

      Issue Date Cross Reference Enquires
      Added on 1 October 2009. Rule 6.07A Please contact:

      Operations, Clearing and Depository
      Email: otclear@sgx.com
      Clearing Hotline Tel: (65) 6236 5319

      1. Introduction

      1.1 Rule 6.07A states that the Clearing House may appoint any person as a Facilitator Agent to perform any function for the purpose of facilitating delivery by Clearing Members.
      1.2 This Practice Note elaborates on the role of a Facilitator Agent, and sets out the Facilitator Agents appointed by the Clearing House, and the functions for which such Facilitator Agents are appointed.

      2. Role of a Facilitator Agent

      2.1 Where, upon maturity of a Contract settled by way of physical delivery of an underlying Commodity, a Clearing Member continues to hold open positions which have been cleared through the Clearing House, the Clearing House may facilitate delivery by such Clearing Member in accordance with the Contract Specifications.
      2.2 The Clearing House may appoint a Facilitator Agent to carry out, on its behalf, any function to facilitate such delivery by a Clearing Member.
      2.3 For the avoidance of doubt, where a Facilitator Agent is appointed, the rights and liabilities (including any exclusion or limitation of liability) as between the Clearing House and Clearing Members in relation to physical delivery provided under Chapter 6 of this Rules, shall continue to apply.

      3. Facilitator Agent for Contracts Traded on the Singapore Commodity Exchange Limited ("SICOM") and Settled by Way of Physical Delivery

      3.1 In respect of Contracts matched and executed on SICOM and cleared through the Clearing House, SICOM shall be appointed as the Clearing House's Facilitator Agent.
      3.2 SICOM shall, on behalf of the Clearing House, perform all functions required to facilitate delivery by Clearing Members in accordance with the relevant Delivery Rules except all matters in relation to Clearing Members' monies.
      3.3 The functions performed by SICOM shall include:
      a) matching of Clearing Members with open positions after the Last Trading Day, in accordance with the Contract Specifications;
      b) acceptance of any documents, or instruments (other than monies) from any Clearing Member required pursuant to the relevant Delivery Rules for the purpose of effecting delivery;
      c) release of any documents or instruments (other than monies of a Clearing Member) to any party in accordance with the Contract Specifications; and
      d) receipt of notification of any claims in relation to the performance of Delivery Obligations from any Clearing Member.
      3.4 Except for matters in relation to Clearing Members' monies, Clearing Members effecting delivery through the Clearing House shall deal directly with SICOM in the performance of their Delivery Obligations, regardless of whether its counterparty is a Clearing Member, or a clearing member of SICOM.
      3.5 Clearing Members shall deal directly with the Clearing House in respect of all matters relating to monies under the Contract Specifications.

    • Practice Note 7.11.1.1 — Daily Settlement Procedures for Eligible Non-Relevant Market Contracts

      Issue Date Cross Reference Enquires
      Added on 22 September 2006 and amended on 23 November 2009 and 8 November 2012. Rule 7.11.1.1 Please contact:

      Operations, Clearing and Depository
      Clearing Hotline Tel: (65) 6236 5319
      Email: otclear@sgx.com

      SGX OTC Clearing Business
      Email: sgxotc@sgx.com

      1. Introduction

      1.1 This Practice Note describes the procedures for determining Daily Settlement Prices for Eligible Non-Relevant Market Contracts.
      1.2 Daily Settlement Price is the official daily closing price of a Contract determined in accordance with SGX-DC Clearing Rule 7.11.1.1. An Eligible Non-Relevant Market Contract is any Non-Relevant Market Contract accepted by the Clearing House for clearing, subject to SGX-DC Clearing Rules, as prescribed by the Clearing House from time to time.
      1.3 The procedures in this Practice Note shall only be applicable for determining the Daily Settlement Price of an Eligible Non-Relevant Market Contract from the first trading day to one day before last trading day.
      The formulas for the computation of Daily Settlement Prices on the last trading day, otherwise also known as Final Settlement Prices, are provided in Appendix 1 of SGX-DC Clearing Rules.

      Refer to Appendix 1.

      2. Procedures

      2.1 Clearing House shall prescribe a list of Price Contributors for each Eligible Non-Relevant Market Contract.
      2.2 Clearing House shall obtain daily price assessments for each Eligible Non-Relevant Market Contract from each Price Contributor.
      2.3 The Daily Settlement Price for a contract month shall be the weighted average price assessments provided by each Price Contributor, whose weight shall be decided by Clearing House. Clearing House may discard the lowest or highest assessments before averaging.
      2.4 In the event that no price assessment is obtained for a contract month, the Daily Settlement Price for that contract month shall be interpolated using the following but not limited to:
      a) available price assessments for preceding months and following months;
      b) current month's spot assessments;
      c) prices of registered transactions.

      3. Price Contributors

      3.1 The Price Contributors for each Eligible Non-Relevant Market Contracts group are:

      Oil Swaps
      a) Platts
      b) Forward Market Curve Limited
      c) Market Participants
      Freight Forward Contracts
      a) The Baltic Exchange Limited
      Iron Ore Swaps
      a) Market Participants

    • Practice Note 7.11.1.2 — Daily Settlement Price Methodology

      Issue date Cross Reference Enquiries
      Added on 22 September 2006 and amended on 1 October 2009, 24 January 2011, 8 November 2012 and 14 November 2016. Rule 7.11.1.2 Please contact Derivatives:

      Telephone No: 6236 8888

      1. Introduction

      Rule 7.11.1.2 of the Clearing Rules states that the Daily Settlement Price for Contracts other than Non-Relevant Market Contracts shall be determined by the Clearing House in accordance with the relevant formula and procedures applicable to each Contract. In arriving at such formula, the Clearing House may, in consultation with the Exchange, take into account factors, including but not limited to:

      a) the last traded price;
      b) bid and offer spread at the close of market;
      c) price data derived from pricing models, as selected or established by the Clearing House from time to time.

      This Practice Note sets out the formulas and methodologies used by the Clearing House to compute the Daily Settlement Price as contemplated in the above Rule.

      2. Methodology for Computation of Daily Settlement Price

      2.1 Most Commonly Adopted Methodology.

      Save for exceptional situations, the Clearing House can use any one of the following methodologies to compute the Daily Settlement Price:
      a) a price determined by a pre-closing routine; or
      b) a price derived from the prices in the closing range;
      c) a price determined by taking into account typical spread relationships with other Contract Months in the relevant Contract;
      d) a price determined by theoretical pricing models selected by the Clearing House; or
      (e) a price determined through polling, conducted by the Clearing House, of market participants and/or any other price source deemed as reliable by the Clearing House.
      Higher bid or lower offer prices at the close may be used by the Exchange in the computation of the Daily Settlement Price under methodologies b, c and d.
      2.2 Exceptional Situations.

      In exceptional cases when none of the methodologies set forth in paragraph 2.1 above yields a Daily Settlement Price that is reflective of market conditions, the Clearing House may use any of the following alternative methodologies for the computation of the Daily Settlement Price:
      a) in regards to Futures Contracts, the Daily Settlement Price may be set at a price which when compared to the Daily Settlement Price of the next Contract Month reflects the same differential that existed between the two Contract Months on the previous day, unless there is a higher bid or lower offer in existence at the close. In such case, the higher bid or lower offer may be the Daily Settlement Price; or
      b) in regards to Futures Contracts or Options Contracts, such other price that the Clearing House determines to be reflective of prevailing market conditions.
      "Option Contracts" and "Futures Contracts" shall have the meaning ascribed to them in the Trading Rules.
      2.3 [This paragraph is deleted.]

    • Practice Note 7.22 — Margins of Third Parties

      Issue date Cross Reference Enquiries
      Added on 23 July 2014 and amended on 25 January 2017. Rule 7.22 Please contact Member Supervision:

      Facsimile No: 6538 8273

      1. Introduction

      1.1 Rule 7.22 sets out Clearing Members' obligations in relation to the collection of margins from Third Parties (including Customers). This Practice Note elaborates on those obligations.

      2. Margin Rates and Acceptable Forms of Margins

      2.1 Margin System

      Standard Portfolio Analysis of Risk Margin System

      2.1.1 The Standard Portfolio Analysis of Risk Margin System ("SPAN") is the risk margin system adopted by the Exchange and the Clearing House. Margin requirements generated by SPAN shall constitute the Exchange's and the Clearing House's minimum margin requirements ("minimum margin requirements").
      2.1.2 SPAN is a risk-based, portfolio approach margining system used to compute minimum overall margin requirements for a portfolio of positions in Contracts. SPAN requirements are computed using risk parameter files which are distributed at least daily by the Clearing House.
      2.1.3 The margin requirements computed under SPAN have two components: the risk component, which accounts for potential changes in the market price and volatility of the Futures Contract1, and the equity component, which is the value of the Option Contract2 marked to the current day's settlement price. If the net option value in a Customer Account is short, it is added to the risk margins to increase the margin requirements. If the net option value is long, it may be applied towards reducing the risk margin requirements.
      2.1.4 All Clearing Members are advised to use SPAN for Contracts. Clearing Members may use margining systems other than SPAN to compute the minimum margin requirements provided the Clearing Members can demonstrate that their systems will always produce margin requirements equal to or greater than the SPAN margin requirements.

      2.2 Margin Rates and Requirements (Rule 7.22.1)

      2.2.1 Margin rates and requirements on Contracts are prescribed by the Clearing House. Under Rule 7.22.1, Clearing Members are required to procure initial margins from their Customers and ensure that their Customers comply with maintenance margins for such amounts as required by the Clearing House.
      2.2.2 For contracts listed in other exchanges, Clearing Members shall ensure that their Customers comply with initial margins and maintenance margins prescribed by the relevant exchanges or clearing houses.
      2.2.3 [Deleted]
      2.2.4 Clearing Members may, at their discretion, set higher margin rates/requirements than that required by the Clearing House. Clearing Members shall review their internal margin rates/requirements on a continual basis to ensure compliance with the required minimum initial margins and maintenance margins prescribed by the Clearing House.

      2.3 Acceptable Forms of Margins (Rule 7.22.2)

      2.3.1 Pursuant to Rule 7.22.2, the Clearing House has prescribed a list of instruments which Clearing Members may accept from Customers for meeting their required initial margins and maintenance margins.
      2.3.2 A list of the acceptable instruments and their prescribed maximum valuations can be found on the Exchange's website (http://www.sgx.com).
      2.3.3 Where a Clearing Member does not have physical possession of Japanese Government Bonds or securities listed on the First Section of Tokyo Stock Exchange, the Clearing Member shall be deemed to have complied with the requirements of Rule 7.22.2 if the Clearing Member can obtain written confirmation from a financial institution in Singapore or in Japan, that the financial institution is holding such securities from the Customers, as custodian for the Clearing Member concerned.
      2.3.4 Bank certificates of deposits, including fixed deposits, may be accepted as good security under the following terms and conditions:
      (1) the Customer signs a memorandum of charge of its deposits in favour of the Clearing Member. The memorandum shall operate as an equitable assignment which entitles the Clearing Member to payment out of the monies in the accounts;
      (2) where a memorandum of charge is given by a corporate Customer, the Clearing Member shall ensure that the memorandum is registered with the Accounting and Corporate Regulatory Authority ("ACRA") (with the filing of the necessary forms). The Clearing Member shall also make a search at ACRA to ensure that there is no prior charge of the same account to other persons;

      the Clearing Member shall also ensure that it receives a confirmation from the bank that the required amount is deposited with the bank and has not been subjected to any banker's lien or right of set-off or consideration, or any other lien or charge. The Clearing Member shall notify the bank of the memorandum of charge as soon as it is executed so that the bank withholds all further payments to its Customer unless such payments are made with the consent of the Clearing Member. The Clearing Member shall document proof of such notice; and
      (3) where a memorandum of charge is given by a Customer who is an individual, the Clearing Member shall cause the Customer to authorise the bank to disclose to the Clearing Member whether there have been notices of earlier charges and the details thereof, if any. This is to ensure that there is no prior charge of the same account to other persons.
      2.3.5 The Clearing House has prescribed that where gold certificates issued by banks approved by MAS or gold bars are used to margin open short gold futures positions, the maximum valuation of these instruments shall be one hundred (100) percent of market value. If these instruments are used for margining positions other than open short gold futures positions, the maximum valuation of these instruments shall be seventy (70) percent of market value.
      2.3.6 Clearing Members are allowed to apply a more conservative valuation (that is, less than the maximum valuation prescribed) on the acceptable instruments.

      3. Margin Calls (Rules 7.22.1 and 7.22.4)

      3.1 Issuance of Margin Calls

      3.1.1 Margin calls are issued to collect the required margins to ensure the performance of a contract. A margin call is a request from a Clearing Member to a Customer to deposit additional margins.
      3.1.2 Pursuant to Rule 7.22.4, whenever a Customer's total net equity falls below the maintenance margins, the Customer Account shall be deemed to be under-margined. The under-margined amount is equal to the difference between the Customer's initial margins and the Customer's total net equity. This is the minimum amount that the Clearing Member must call from the Customer in order to restore the Customer's total net equity to the initial margins level.
      3.1.3 Margin calls shall be made within one Trading Day after the occurrence of the event giving rise to the margin calls.
      3.1.4 A Clearing Member may, at their discretion, call for additional margins or issue margin calls on a more frequent basis, including the issuance of intra-day margin calls.

      3.2 Computation of Margin Calls

      3.2.1 In determining margin calls, Customer Accounts shall be reviewed at the close of the Trading Day. All Customer Accounts opened by the same Customer, for the benefit of its own clients shall be combined in one group. All other Customer Accounts opened by the same Customer shall be combined in a separate group. Below is an example to illustrate the treatment of the accounts opened by Customer XYZ under the following scenarios:
      (1) XYZ — proprietary A/C 1
      XYZ — client omnibus A/C 2
      Treatment : A/C 1 and A/C 2 should be treated as separate accounts for the purpose of computing margin calls.
      (2) XYZ — proprietary A/C 1A
      XYZ — proprietary A/C 1B
      Treatment : A/C 1A and A/C 1B should be combined when computing margin calls.
      (3) XYZ — client speculative A/C 2A
      XYZ — client omnibus A/C 2B
      Treatment : A/C 2A and A/C 2B should be combined when computing margin calls.
      3.2.2 If Customer Accounts are not combined in accordance with paragraph 3.2.1 above, there is a risk that the Clearing Member may either fail to issue a margin call or understate the amount required under a margin call. This is illustrated below:

      Assume proprietary A/C A & proprietary A/C B are owned by the same Customer:

        A/C A $ A/C B $ Combined $
      Total net equity 8,000 42,000 50,000
      Initial margins 26,000 50,000 76,000
      Maintenance margins 21,000 40,000 61,000
      Under-margined 18,000 Nil 26,000
      Margin Call Required 18,000 Nil 26,000


      In the above example, if the two accounts are not combined, the Customer as a whole would be subjected to a lesser margin call of $18,000 instead of $26,000.

      3.3 Reduction and Deletion of Margin Calls

      3.3.1 A Clearing Member may:
      (1) reduce the amount required under a margin call through a receipt of cash and other acceptable forms of margins which are less than the amount required under the margin call. The Customer is still required to meet the remaining amount required under the margin call; and
      (2) consider the total margin call to be satisfied if the Customer's total net equity is equal to or greater than the Customer's initial margins as of the close of the Trading Day.
      3.3.2 A Clearing Member shall reduce a Customer's oldest outstanding margin call first. Individual margin calls shall be aged separately throughout their existence. A Customer's total margin call is the sum of all individually aged margin calls. A Clearing Member's records shall clearly indicate the age of all margin calls issued and outstanding.
      3.3.3 In order to protect the age of outstanding margin calls for re-established positions, the liquidation and re-establishment of positions during the same Trading Day to circumvent paragraph 3.3.2 is not allowed.
      3.3.4 Where a Customer is meeting a margin call by remitting cash funds, Clearing Members shall take into consideration only those funds that they have actually received when determining whether the Customer's total net equity has been restored to the initial margins level. Clearing Members shall not treat cash funds as received even though the Customer's remittance indicates that the funds would be forthcoming on a future value date. Clearing Members are not allowed to use the Customer's confirmation that the funds are forthcoming to reduce or delete a margin call as the funds have yet to be received.

      3.4 Recording and Monitoring

      3.4.1 A Clearing Member is required to keep written records which should include the following in respect of each Customer:
      (1) all margin calls, whether made in writing or by telephone and the number of days such calls are outstanding; and
      (2) all reductions and deletions of margin calls and the dates they occurred.
      3.4.2 Any manual adjustments made to equity system reports to determine a Customer's margin status (e.g. adjustments to margin requirements, margin calls, etc.) shall be maintained on file.
      3.4.3 Clearing Members shall maintain a proper monitoring system to ensure that all Customers who are under-margined are subject to prompt margin calls and that such calls are being properly monitored and followed up in order to restore the relevant Customers' total net equity to the initial margins levels.

      3.5 Ageing of Margin Calls

      3.5.1 In ageing margin calls, for the purpose of determining whether calls are met within the reasonable period:

      T = trade date/ date that the Customer's total net equity falls below the maintenance margins

      1 = first Trading Day after the date that the Customer's total net equity falls below the maintenance margins

      2 = second Trading Day after the date that the Customer's total net equity falls below the maintenance margins

      3 = third Trading Day after the date that the Customer's total net equity falls below the maintenance margins

      Reasonable period shall have the meaning ascribed to it in Rule 7.22.

      3.6 Examples

      The following examples illustrate how margin calls are aged, reduced and deleted.

      Assumptions:

      (1) Customer's total net equity and margin requirements are as of the close of the respective Trading Days indicated.
      (2) The Customer was properly margined on the previous Trading Day (Friday). If an individual margin call is required to be issued, the margin call shall equal: initial margins — total net equity

      Example 1 — Issuing of margin calls due to unfavourable market movements

      Margin calls must be issued no later than one Trading Day after the date that the Customer's total net equity falls below the maintenance margins.

        Monday Tuesday Wednesday Thursday
      Total net equity 50,000 49,000 44,000 44,000
      Initial margins 60,000 60,000 60,000 60,000
      Maintenance margins 50,000 50,000 50,000 50,000
      UNDER-MARGINED Nil 11,000 16,000 16,000
      Unfavourable market movements [UMM] of $1,000 occurred on Tuesday and $5,000 on Wednesday. No margins were deposited.
      CALL RE'QD/(AGE) -0- 11,000 (T) 11,000 (1) 11,000 (2)
            5,000 (T) 5,000 (1)
          Customer Account is under-margined Clearing Member must issue margin call of $11,000 no later than today. Clearing Member must issue margin call of $5,000 no later than today.
            Additional margin call of $5,000 required due to UMM.  

      Example 2 — Impact on margin calls due to liquidation of positions

      Margin calls cannot be reduced/deleted if the liquidation does not restore the Customer's total net equity to or above initial margins.

        Monday Tuesday Wednesday Thursday
      Total net equity 45,000 45,000 45,000 45,000
      Initial margins 60,000 55,000 55,000 50,000
      Maintenance margins 55,000 53,000 53,000 48,000
      UNDER-MARGINED 15,000 10,000 10,000 5,000
      Positions were liquidated on Tuesday reducing initial margins by $5,000 and maintenance margins by $2,000 and on Thursday reducing initial margins by $5,000 and maintenance margins by $5,000. No margins were deposited.
      CALL RE'QD/(AGE) 15,000 (T) 15,000 (1) 15,000 (2) 15,000 (3)
          Margin call cannot be reduced or deleted as the liquidation did not result in total net equity equal to or exceed initial margins.   Margin call cannot be reduced or deleted as the liquidation did not result in total net equity equal to or exceed initial margins.

      Example 3 — Impact on margin calls due to receipt of margin deposits

      Margin calls can be reduced by the amount of margins actually received.

        Monday Tuesday Wednesday Thursday
      Total net equity 50,000 45,000 44,000 47,000
      Initial margins 60,000 60,000 60,000 60,000
      Maintenance margins 55,000 55,000 55,000 55,000
      UNDER-MARGINED 10,000 15,000 16,000 13,000
      Unfavourable market movements [UMM] of $5,000 occurred on Tuesday and $1,000 on Wednesday. Cash of $3,000 was deposited on Thursday.
      CALL RE'QD/(AGE) 10,000 (T) 10,000 (1) 10,000 (2) 7,000 (3)
          5,000 (T) 5,000 (1) 5,000 (2)
            1,000 (T) 1,000 (1)
          Additional margin call of $5,000 required due to UMM. Additional margin call of $1,000 required due to UMM. Margin call of $10,000 can be reduced by the cash receipt of $3,000.

      Example 4 — Impact on margin calls due to favourable market movements that are less than total margin call outstanding

      Margin calls cannot be reduced/deleted if favourable market movements do not restore the Customer's total net equity to or above initial margins.

        Monday Tuesday Wednesday Thursday
      Total net equity 55,000 58,000 52,000 58,000
      Initial margins 60,000 60,000 60,000 60,000
      Maintenance margins 58,000 58,000 58,000 58,000
      UNDER-MARGINED 5,000 No (see below) 8,000 No (see below)
      Favourable market movements [FMM] of $3,000 occurred on Tuesday. Unfavourable market movements [UMM] of $6,000 occurred on Wednesday. FMM of $6,000 occurred on Thursday. No margins were deposited.
      CALL RE'QD/(AGE) 5,000 (T) 5,000 (1) 5,000 (2) 5,000 (3)
            3,000 (T) 3,000 (T)
          Margin call of $5,000 cannot be reduced or deleted as FMM did not result in total net equity equal to or exceed initial margins. Additional margin call of $3,000 required due to UMM. Margin call of $5,000 and $3,000 cannot be reduced or deleted as FMM did not result in total net equity equal to or exceed initial margins.

      Example 5 — Impact on margin calls due to favourable market movements that exceed total margin call

      Margin calls can be deleted if favourable market movements restore the Customer's total net equity to or above initial margins.

        Monday Tuesday Wednesday Thursday
      Total net equity 54,000 51,000 58,000 60,000
      Initial margins 60,000 60,000 60,000 60,000
      Maintenance margins 55,000 55,000 55,000 55,000
      UNDER-MARGINED 6,000 9,000 No (see below) -0-
      Unfavourable market movements [UMM] of $3,000 occurred on Tuesday. Favourable market movements [FMM] of $7,000 occurred on Wednesday and $2,000 on Thursday. No margins were deposited.
      CALL RE'QD/(AGE) 6,000 (T) 6,000 (1) 6,000 (2) -0-
          3,000 (T) 3,000 (1)  
          Additional margin call of $3,000 required due to UMM. Margin call of $6,000 was not reduced or deleted as FMM did not result in total net equity equal to or exceed initial margins. Total margin call of $9,000 deleted as total net equity equals initial margins.

      Example 6 — Impact on margin calls due to favourable market movements plus receipt of margins that exceed total margin call

      Margin calls can be deleted if favourable market movements and receipt of margins restore the Customer's total net equity to or above initial margins.

        Monday Tuesday Wednesday Thursday
      Total net equity 50,000 52,000 52,000 61,000
      Initial margins 60,000 60,000 60,000 60,000
      Maintenance margins 58,000 58,000 58,000 58,000
      UNDER-MARGINED 10,000 8,000 8,000 -0-
      Favourable market movements [FMM] of $2,000 occurred on Tuesday. Cash of $9,000 was deposited on Thursday.
      CALL RE'QD/(AGE) 10,000 (T) 10,000 (1) 10,000 (2) -0-
          Margin call of $10,000 was not reduced or deleted as FMM did not result in total net equity equal to or exceed initial margins.   As both cash receipt and FMM caused total net equity to exceed initial margins, the margin call of $10,000 was deleted.

      4. Under-Margined Accounts (Rule 7.22.3)

      4.1 Acceptance of Orders

      4.1.1 A Clearing Member shall only allow a Customer to incur a new trade when the required margins are on deposit or forthcoming within a reasonable period.
      4.1.2 In a situation where a Customer has failed to place margins within the reasonable period, such that the Customer's total net equity is not restored to the initial margins level, the Clearing Member concerned:
      (1) is required to promptly take all necessary actions including but not limited to closing all or such part of the Customer's positions to restore the Customer's total net equity to the initial margins level; and
      (2) shall not accept orders for new trades, including day trades, for such Customers. However, orders which would result in reducing the Customer's maintenance margins requirements may be accepted by the Clearing Member.
      4.1.3 A Clearing Member shall not accept orders for the purchase of option contracts unless the full amount of premium is on deposit or forthcoming within a reasonable period.
      4.1.4 For settlement currency denominated in Japanese Yen, 'reasonable period' means a period which shall not exceed three (3) Trading Days from the trade date (T+3). For all other settlement currencies, it means a period which shall not exceed two (2) Trading Days from the trade date (T+2).
      4.1.5 For example, if a Clearing Member has received indication from the Customer's banker on T + 1, that the Customer has remitted cash of US$1 million for value date T + 4, the Clearing Member shall not treat the US$1 million as part of the Customer's ledger balance on T + 1, as the funds would actually be received by the Clearing Member only on the value date of T + 4. The amount shall be accounted as part of Customer's ledger balance only on close of business T + 4. In the above example, since the Customer's funds are not forthcoming within the reasonable period (i.e. by the close of business T + 2), the Customer is not allowed to incur any new trade during this period (T + 1 and T + 2) except for trades which reduce the Customer's maintenance margins requirements.
      4.1.6 In a situation where a Customer has liquidated all its positions resulting in a negative total net equity, the Clearing Member shall not accept orders for the Customer until sufficient funds or acceptable instruments are deposited such that total net equity is no longer negative.
      4.1.7 The following indicates what is the allowable trading activity for a Customer whose total net equity is not restored to the initial margins level after a margin call:
      (A) During the reasonable period,
      (i) if the Clearing Member receives indication from the Customer that margins are forthcoming within the reasonable period

      Allowable Trading Activity Within The Reasonable Period

      Trading Activity Risk Increasing Risk Neutral Day Trading Risk Reducing
      Allowed for Customer Yes Yes Yes Yes
      (ii) if the Clearing Member receives indication from the Customer that margins are forthcoming after the reasonable period or that no funds are forthcoming

      Allowable Trading Activity Within The Reasonable Period

      Trading Activity Risk Increasing Risk Neutral Day Trading Risk Reducing
      Allowed for Customer No No No Yes
      (B) Beyond the reasonable period,

      Allowable Trading Activity Beyond The Reasonable Period

      Trading Activity Risk Increasing Risk Neutral Day Trading Risk Reducing
      Allowed for Customer No No No Yes
      In the above examples:

      A risk increasing trade is the establishment or closure of a position in a contract which increases a Customer's maintenance margins requirement (e.g. closing one leg of a spread position).

      A risk neutral trade is the establishment of a position in a contract which does not impact a Customer's maintenance margins requirement (e.g. spread trades that do not impact maintenance margins requirements).

      A risk reducing trade is the establishment or closure of a position in a contract which reduces the Customer's maintenance margins requirement (e.g. liquidation of a naked open position).

      4.2 Prohibition of Financing of Trading Margins

      4.2.1 Under no circumstances shall a Clearing Member enter into any financing arrangement with any Customer to allow the Customer to trade without placing the required minimum margins. This shall not apply to a Bank Trading Member or Bank Clearing Member.

      4.3 Monitoring Procedures

      4.3.1 A Clearing Member is required to maintain proper monitoring and internal control procedures to ensure that the requirements under Rule 7.22 are complied with at all times.

      4.4 Examples

      Assumptions:

      (1) All accounts are Customer Accounts.
      (2) All margin calls are properly issued and aged for the full amount.
      (3) The Customer's initial margins and maintenance margins remain unchanged.
      (4) The Customer was properly margined on the previous Trading Day (Friday).
      (5) The Customer has indicated that margins are forthcoming within the reasonable period.

      Example 1 — Under-margined beyond reasonable period — Deletion of margin calls

      Trading is allowed within reasonable period but no trading is allowed beyond reasonable period except for risk reducing trades until the Customer's total net Equity is restored to the initial margins level.

      Week 1

        Monday Tuesday Wednesday Thursday Friday
      AMT U/M 5,000 5,000 5,000 5,000 -0-
      CALL/AGE 5,000 (T) 5,000 (1) 5,000 (2) 5,000 (3)  
      TRADING All* All All RR** All

      * All trading activity
      ** Only risk reducing trades

      Assuming the margin call is in US Dollars, the reasonable period is T + 2, which is as of the close of business on Wednesday. As of Thursday, the Customer cannot be allowed to incur any risk increasing, risk neutral or day trades. The Customer can only be allowed to incur risk reducing trades.

      On Friday, a cash deposit of $5,000 was received to delete the margin call. Once the Customer's total net equity is restored to the initial margins level, all trading activities would be allowed.

      Example 2 — Under-margined beyond reasonable period — Deletion and reduction of margin calls

      Trading is allowed within reasonable period but no trading is allowed beyond reasonable period except for risk reducing trades until the Customer's total net equity is restored to the initial margins level.

      Week 1

        Monday Tuesday Wednesday Thursday Friday
      AMT U/M 10,000 10,000 10,000 10,000 15,000
      CALL/AGE 10,000 (T) 10,000 (1) 10,000 (2) 10,000 (3) 10,000 (4)
      5,000 (T)
      TRADING All* All All All RR**
      Unfavourable market movements of JPY 5,000 occurred on Friday.

      Assuming the margin call is in Japanese Yen, the reasonable period is T + 3, which is as of the close of business on Thursday. As of the close of business on Thursday, the Customer's total net equity was not restored to the initial margins level. Thus on Friday, the Customer can only be allowed to incur risk reducing trades.

      Week 2

        Monday Tuesday Wednesday Thursday Friday
      AMT U/M 15,000 5,000 4,000 1,000 1,000
      CALL/AGE 10,000 (5)
      5,000 (1)
      5,000 (2) 5,000 (3) 2,000 (4) 2,000 (5)
      TRADING RR** All* All RR RR
      Favourable market movements of JPY 1,000 occurred on Wednesday.

      * All trading activity
      ** Only risk reducing trades

      On Tuesday of Week 2, cash deposit of JPY 10,000 was received which deleted the outstanding margin call of JPY10,000. After this, the only margin call of JPY 5,000 is still within the reasonable period of T + 3. Thus during this period, Tuesday and Wednesday, all trading is allowed. On the close of business on Wednesday, the Customer's total net equity was not restored to the initial margins level. On Thursday, cash of JPY3,000 was received which reduced the margin call to JPY2,000. As the Customer Account is still under-margined with a margin call of JPY2,000 outstanding beyond the reasonable period, the Customer on Thursday and Friday can only be allowed to incur risk reducing trades.

      5. Omnibus Accounts and Other Margin Policies (Rule 7.22.1)

      5.1 Omnibus Accounts

      5.1.1 Omnibus Accounts generally contain concurrent long and short positions. Clearing Members shall ensure that positions in an Omnibus Account are carried and margined on a gross basis.
      5.1.2 A Clearing Member shall obtain and maintain written instructions from undisclosed Omnibus Account holders for positions which are entitled to be margined as spread positions.
      5.1.3 For purchase and sale offsets, a Clearing Member shall obtain and maintain written instructions from undisclosed Omnibus Account holders on a daily basis. If no such instructions are received, the Clearing Member must assume that the positions belong to separate owners. These positions must be margined on a gross basis.

      5.2 Grouping of Accounts

      5.2.1 For the purpose of margin computation, positions in accounts belonging to the same beneficial owner who may be the Customer or a client of the Customer, may be combined. Concurrent speculative long and short positions may also be netted in such accounts.
      5.2.2 Accounts which are owned by different legal entities e.g. related corporations must be treated separately for margin computation purposes.

      5.3 Excess Margins Payments

      5.3.1 Pursuant to Rule 7.22, a Clearing Member may allow its Customers to withdraw Excess Margins3. The withdrawal of Excess Margins must be supported by proper documentation.
      5.3.2 If the net option value is long, it may be applied towards reducing the risk margin requirements. However, option value in excess of initial margins cannot be treated as Excess Margins available for disbursement. The computation of Excess Margins available for disbursement treats option value differently from all other margins. This is because option value is not a cash asset and does not form part of Customer's total net equity.
      5.3.3 For example, Customer deposits $1,000 in its account. It then purchases an option contract where the option premium is $1,000. At the time of purchase, the full premium of $1,000 is deducted from its account resulting in zero total net equity. Thus, there are no funds available for withdrawal. The option value of the long option position, which at the time of purchase is $1,000 (option value would vary with passage of time), cannot be available for withdrawal as it does not form part of the Customer's total net equity. Furthermore, the Clearing Member would be deemed to be financing the Customer's trades, which is prohibited under these guidelines, in the purchase of the option contract if the option value is allowed to be withdrawn.
      5.3.4 If total net equity is zero or negative, a disbursement cannot be made as there are no funds available. The Clearing Member shall use the Customer's latest available total net equity and latest required initial margins to determine the amount of Excess Margins available for disbursement, notwithstanding that the Customer (e.g. a Customer in different time zone) has yet to receive the latest Customer statement sent out by the Clearing Member. In determining the Excess Margins available for disbursement, the Clearing Member shall take into consideration the Customer's incoming remittance and the Clearing Member's disbursement based on value dates. If an incoming remittance is accounted for in determining the amount of Excess Margins to be released, the Clearing Member shall effect the disbursement only after the receipt of the funds. This means that the value date for the disbursement shall be subsequent to the value date of the Customer's incoming remittance.
      5.3.5 For the purpose of determining the amount of Excess Margins available for disbursement, all Customer Accounts opened by the same Customer, for the benefit of its own clients shall be combined in one group ("Group A"). All other Customer Accounts opened by the same Customer shall be combined in a separate group ("Group B"). If the Clearing Member does not combine such accounts, it runs the risk of allowing a Customer to withdraw more funds than what the Customer actually has available with the Clearing Member [see Example 4 below for illustration]. Available Excess Margins from Group A cannot be used for disbursement for Group B and vice versa.

      5.4 Examples

      Note: In the computation, if the net option value is greater than the initial margin risk component, the maximum amount of Excess Margins available for disbursement shall be equal to the total net equity.

      Example 1 — Excess Margins Payments

      Customer Account Balance
      Total net equity $5,000
      Net option value $1,200
      Initial margins risk component $3,000

      * An Excess Margins payment can be made from the Customer Account for $3,200 {$5,000 − [($3,000 − $1,200) which = $1,800]}

      Example 2 — Excess Margins Payments

      Customer Account Balance
      Total net equity $-0-
      Net option value $9,000
      Initial margins risk component $7,000

      * As total net equity is zero, no payment can be made. {$-0- − [($7,000 − $9,000) which = 0]}. The only margin asset in the Customer Account is long option value which cannot be used to make an Excess Margins payment.

      Example 3 — Excess Margins Payments

      Customer Account Balance
      Total net equity $32,800
      Net option value $<12,000>
      Initial margins risk component $14,000

      * An Excess Margins payment can be made from the Customer Account for $6,800 {$32,800 − [($14,000 − <$12,000>) which = $26,000]}

      Example 4 — Accounts owned by the same Customer

      Assume client A/C A & client A/C B are owned by the same Customer.

        A/C A $ A/C B $ COMBINED $
      Total net equity 8,000 80,000 88,000
      Initial margins 25,000 50,000 75,000
      Maintenance margins 20,000 40,000 60,000
      Excess Margins for withdrawal (17,000) 30,000 13,000

      If client A/C A and client A/C B are not combined, then the amount of Excess Margins that is available for withdrawal, ie $30,000, is greater than what is actually available for the Customer as a whole.

      5.5 Concurrent Long and Short Positions

      5.5.1 Concurrent long and short positions are long and short positions traded on the same market in the same futures or option contract for the same delivery month or expiration date and, if applicable, having the same strike price.
      5.5.2 A Clearing Member may carry concurrent long and short positions as follows:
      (1) all positions held by Omnibus Account holders shall be margined on a gross basis, unless otherwise exempted by the Exchange; and
      (2) in a hedge account in which both the long and short positions are bona fide hedge positions, such positions shall be margined on a net basis, unless otherwise required by other regulatory bodies.
      5.5.3 A Clearing Member may carry concurrent long and short hold-open positions for speculative and hedge accounts. Hold-open positions are positions offset at the Exchange but have been held open on the Clearing Member's internal bookkeeping records for the convenience of the Customer. As hold-open positions only remain open on the Clearing Member's internal records and have been offset at the Exchange, no margin is required. The Clearing Member's internal bookkeeping records shall clearly indicate all hold-open positions.

      Added on 23 July 2014 and amended on 25 January 2017.


      1 "Futures Contract" refers to any Contract, over any Underlying, designated by the Exchange as a futures contract.

      2 "Option Contract" refers to any Contract which grants an option in respect of an Underlying or a Futures Contract.

      3 "Excess Margins" refers to credits in excess of initial margins.

    • Practice Note 7.23 — Additional Margins

      Issue date Cross Reference Enquiries
      Added on 8 August 2016 Rule 7.20 and Rule 7.23 Please contact Risk Management:

      rmd@sgx.com

      1. Introduction

      1.1 Rule 7.20 states that margin requirements shall be prescribed by the Clearing House from time to time, and Rule 7.23 provides for the Clearing House to call for additional margins from one or more Clearing Members in certain situations. This Practice Note elaborates on the additional margins.
      1.2 The objective of additional margin requirements is to provide greater assurance that unique risks which may potentially not be captured under the Clearing House's margin setting methodology are appropriately accounted for and collateralized. As risks unique to a Clearing Member attract additional margin rather than being mutualized through the Clearing Fund, it makes Clearing Members accountable for excessive risk they bring to the system.
      1.3 The Clearing House conducts daily monitoring of Clearing Members' exposures and assesses the adequacy of the Clearing House and Clearing Members' resources using a comprehensive range of scenarios. In addition, as part of its continuing risk management process, the Clearing House monitors news and developments which may affect Clearing Members, and conducts risk-based inspections on Clearing Members' risk and credit management practices.
      1.4 In the event that any of the circumstances specified in Rule 7.23 exist, the Clearing House may impose additional margin requirements. Such additional margin requirements may include, without limitation:
      (a) Default Fund risk add-on;
      (b) Credit risk add-on;
      (c) Liquidity risk add-on;
      (d) Position risk add-on; and
      (e) Discretionary risk add-on.
      1.5 If the composition of a Clearing Member's portfolio calls for multiple add-ons, the Clearing House may at its discretion decide on an appropriate quantum sufficient to cover the risks.
      1.6 For clarity, the additional margin requirements prescribed under this Practice Note do not count towards the sources of funds for the clearing fund as prescribed in Rule 7A.06 ("Clearing Fund").
      1.7 Besides the add-ons described in paragraph 1.4 of this Practice Note, the Clearing House also imposes margin add-on on positions held in respect of Applicable Customer Accounts pursuant to Rule 7.30. The details are provided in Practice Note 7.30.

      2. Default Fund risk add-on

      2.1 The Clearing House may impose a default fund risk add-on to mitigate risk arising from a Clearing Member's stress loss when its potential tail risk exposure is significant.
      2.2 The Clearing House conducts daily stress testing of Clearing Members' outstanding positions in line with the CPMI-IOSCO1 and global best practices to assess clearing fund adequacy. The test includes a comprehensive range of stressed scenarios, and clearing fund resources must be able to cover the simultaneous default of the Clearing Member and its affiliated Clearing Members with the largest aggregate loss ("Top 1"), and two other financially weakest Clearing Members ("Weak 1", "Weak 2").
      2.3 While stress testing focuses on the mutualized resources to cover a default of the Top 1, Weak 1 and Weak 2, the Clearing House would also want to secure appropriate amount of resources from an individual Clearing Member with significant potential tail risk exposure. This provides a balance between mutualization and the defaulter pay principle. For guidance, the potential tail risk exposure is the worst loss estimated from different stressed scenarios, net of margins and any add-ons. The potential tail risk exposure is considered to be significant if:
      (a) the potential tail risk exposure of a Clearing Member and its affiliated Clearing Members ("Member Group") exceeds a percentage (a threshold as determined by SGX) of SGX-DC Clearing Fund resources ("Threshold 1"); or
      (b) the aggregate potential tail risk exposure of any Member Group, together with Weak 1 and Weak 2, exceeds a percentage (a threshold as determined by SGX) of SGX-DC Clearing Fund resources ("Threshold 2"). Threshold 2 will be higher than Threshold 12.
      2.4 The Clearing House will determine the quantum of the default fund risk add-on based on the potential tail risk exposure from each Clearing Member relative to each of the two thresholds, as described below:
      •    In respect of Threshold 1, the applicable add-on for a Member Group is equal to the difference between its potential tail risk exposure and the threshold;
      •    In respect of Threshold 2, the total applicable add-on is equal to the difference between (i) the potential tail risk exposure aggregated across the Member Group, Weak 1 and Weak 2, (provided the Member Group does not include Weak 1 or Weak 2) after offsetting any add-on arising from Threshold 1, and (ii) the threshold. The applicable add-on is then allocated to the Member Group, Weak 1 and Weak 2 proportional to their exposure; and
      •    The add-on for a Clearing Member is equal to the sum of its applicable add-on arising from Threshold 1 and/or Threshold 2. The Clearing House may at its sole discretion not impose on Weak 1 or Weak 2 the add-on if it is not significant.
      2.5 An illustration of the calculation is provided at the end of this Practice Note.

      3. Credit risk add-on

      3.1 The Clearing House may impose a credit risk add-on if there are concerns regarding the solvency or credit-worthiness of a Clearing Member. For guidance, these concerns may be based on indicators that include, without limitation:
      (a) deterioration in the credit standing of the Clearing Member as assessed through SGX's internal credit risk rating model, downgrading of the credit rating or credit outlook of the member or its parent/affiliates by external credit agencies, widening credit default swaps of the member or its parent/affiliates;
      (b) adverse market sentiments/news or any other relevant indicators on the Clearing Member or its parent/affiliate, or when the Clearing House believes the Clearing Member or its parent/affiliate may be adversely affected by unstable market conditions or price fluctuations which the Clearing House deems a concern;
      (c) reduction of the Clearing Member's financial resources;
      (d) in the Clearing House's view, there is an increase in the Clearing Member's risk exposure, for example, increased operational risk due to unsound risk or credit practices or, that potentially places the Clearing House at greater risk; and
      (e) other specific issues or concerns relating to the Clearing Member, which may arise from SGX's on-site inspection, the Authority's audit findings; or frequent rule violations committed by the Clearing Member.
      3.2 For guidance, the quantum of the credit risk add-on for Clearing Members will be determined by considering the following:
      (a) for a Clearing Member with credit standing the Clearing House deems equivalent to B rating and below (based on the indicators described in paragraph 3.1 of this Practice Note), the quantum is equal to the difference between the member's potential tail risk exposure and a threshold. This threshold3 will be determined by SGX, as a percentage of actual SGX-DC Clearing Fund resources and will be lower than the Threshold 1 described in paragraph 2.3 of this Practice Note;
      (b) for a Clearing Member that clears Over-the-counter Financial Derivatives ("OTCF") Contracts, the quantum of the credit risk add-on will be based on the "Credit Rating Add-on" as provided in the OTCF Clearing Member Guide, provided it is not at the same time subject to the add-on described in paragraph 3.2(a) of this Practice Note; and
      (c) the Clearing Member's available financial resources, prevailing market conditions and the size of Clearing Member's positions.

      4. Liquidity risk add-on

      4.1 The Clearing House may impose a liquidity risk add-on if there are liquidity concerns on a Clearing Member, such as not maintaining sufficient liquid resources to cover the potential funding gap for its variation margin.
      4.2 The quantum of the liquidity risk add-on may be to close potential funding gap, taking into consideration any mitigating actions taken by the member. For guidance, the potential funding gap is estimated based on:
      (a) its potential variation margin impact over the next clearing day for its current day portfolio (on the assumption of static portfolio), and
      (b) the Clearing Member's liquid resources that is available (to offset the potential variation margin impact), which includes its excess margin collateral held with SGX-DC, and credit lines granted by its settlement banks.
      4.3 In the context of a Clearing Member that clears OTCF Contracts, a Liquidity Margin Multiplier applies in respect of its OTCF Contracts as provided in the OTCF Clearing Member Guide.

      5. Position risk add-on

      5.1 The Clearing House may impose a position risk add-on if:
      (a) for a Contract other than OTCF, a significant proportion of the open interest in the Contract is highly concentrated in a customer or a Clearing Member; or
      (b) for an OTCF Contract, a customer or a Clearing Member has gathered significant exposure to one or more bucket tenors.
      5.2 The quantum of the position risk add-on should mitigate the potential slippage when liquidating a large portfolio. For guidance, before imposing position risk add-on for a Contract other than OTCF, the Clearing House may take into considerations the risk contribution from the Contract, and whether the concentration will be cured within a short period of time. For OTCF Contracts, reference may be made to the "Large Exposure Add-on" provided in the OTCF Clearing Member Guide.

      6. Discretionary risk add-on

      6.1 The Clearing House may impose a discretionary risk add-on to a Contract or on Clearing Members with positions in a Contract to cover unique risk that may not be captured in the estimate of the Contract's potential future exposure or the conditions described in the earlier paragraphs, or to cover any types of risk arising from exceptional market conditions. The quantum of the add-on is discretionary depending on the circumstances that necessitate it. The add-on may be imposed as an absolute dollar amount, or as a percentage add-on to a Clearing Member's maintenance margin requirements, or as percentage add-on to the Contract's margin.
      6.2 An example is the gap risk associated with FX-related Contracts that may arise from potential changes in currency regimes or political environment. This is known as the "Gap Risk Add-on" in the OTCF Clearing Member Guide for Clearing Members that clear OTCF Contracts. To determine the quantum of the FX gap add-on, the Clearing House may, but not limited to, make reference to similar events in the past for relevant currency pairs.

      ILLUSTRATION ON THE CALCULATION OF THE DEFAULT FUND RISK ADD-ON

      Assumptions:
      (i) Actual Clearing Fund resource is $800.
      (ii) Assume SGX assigns percentages of 70% and 90% to Threshold 1 and Threshold 2 respectively.
      Threshold 1: 70% x 800 = 560 (Any Member Group)
      Threshold 2: 90% x 800 = 720 (Any Member Group + Weak 1 + Weak 2)
      Example 1 — Add-on applies to a Member Group X only

      Assume only one stress testing scenario generates exposure that exceed the thresholds,
      •    Exposure (X + Weak 1 + Weak 2) = 700
      •    Exposure (X) = 640
      •    Exposure (Weak 1) = 60
      •    Exposure (Weak 2) = 0
          Loss exceeds threshold Potential add-on
        Loss Threshold 1 Threshold 2 Threshold 1 Threshold 2
      X + Weak 1 + Weak 2 700   No    
      X 640 Yes   640-560=80  
      Weak 1 60 No      
      Weak 2 0 No      
      •    Therefore, credit risk add-on of 80 applies to Member Group X only.
      Example 2 — Add-on applies to a Member Group X, and Weak 1 and Weak 2 by apportionment

      Assume only one stress testing scenario generates exposure that exceed the thresholds,
      •    Exposure (X + Weak 1 + Weak 2) = 760
      •    Exposure (X) = 520
      •    Exposure (Weak 1) = 200
      •    Exposure (Weak 2) = 40
          Loss exceeds threshold Potential add-on
        Loss Threshold 1 Threshold 2 Threshold 1 Threshold 2
      X + Weak 1 + Weak 2 760   Yes   760-720=40
      X 520 No      
      Weak 1 200 No      
      Weak 2 40 No      
      •    Therefore, credit risk add-on of 40 applies to (X + Weak 1 + Weak 2). The add-on for each of the three members will be proportionate to their share of the aggregate exposure.
      •    For X, add-on = 520/(520+200+40)*40 = 28
      •    For Weak 1, add-on = 200/(520+200+40)*40 = 11
      •    For Weak 2, add-on = 40/(520+200+40)*40 = 2
      Example 3 — Add-on applies to a Member Group X, and Weak 1 and Weak 2 by apportionment

      Assume only one stress testing scenario generates exposure that exceed the thresholds,
      •    Exposure (X + Weak 1 + Weak 2) = 820
      •    Exposure (X) = 640
      •    Exposure (Weak 1) = 180
      •    Exposure (Weak 2) = 0
          Loss exceeds threshold Potential add-on
        Loss Threshold 1 Threshold 2 Threshold 1 Threshold 2
      X + Weak 1 + Weak 2 820   Yes   820-720=100
      X 640 Yes   640-560=80  
      Weak 1 180 No      
      Weak 2 0 No      
      •    Based on Threshold 1, credit risk add-on of 80 applies to the X.
      •    Based on Threshold 2, there is a balance of 20 since an add-on of 80 already applies to X from Threshold 1. This balance will be apportioned among X, Weak 1, and Weak 2.
      •    For X, add-on from Threshold 1 = 80
      •    For X, add-on from Threshold 2 = 560/(560+180)*20 = 15^
      •    For Weak 1, add-on = 180/(560+180)*20 = 5
      •    For Weak 2, add-on = 0

      ^ The loss for X is taken as 560 here because it has been partially offset by the 80 from Threshold 1. (When X exceeds Threshold 1, the calculation for its pro rata assignment under Threshold 2 will be based on Threshold 1.)
      Example 4 — Add-on applies to a Member Group X, a Member Group Y, and Weak 1 and Weak 2 by apportionment

      Assume a stress testing scenario generates exposure that exceed the thresholds,
      •    Exposure (X + Weak 1 + Weak 2) = 820
      •    Exposure (X) = 640
      •    Exposure (Weak 1) = 180
      •    Exposure (Weak 2) = 0
      Assume a second stress testing scenario generates exposure that also exceed the thresholds,
      •    Exposure (Y + Weak 1 + Weak 2) = 790
      •    Exposure (Y) = 620
      •    Exposure (Weak 1) = 170
      •    Exposure (Weak 2) = 0
      First stress scenario
          Loss exceeds threshold Potential add-on
        Loss Threshold 1 Threshold 2 Threshold 1 Threshold 2
      X + Weak 1 + Weak 2 820   Yes   820-720=100
      X 640 Yes   640-560=80  
      Weak 1 180 No      
      Weak 2 0 No      

      Second stress scenario
          Loss exceeds threshold Potential add-on
        Loss Threshold 1 Threshold 2 Threshold 1 Threshold 2
      Y + Weak 1 + Weak 2 790   Yes   790-720=70
      Y 620 Yes   620-560=60  
      Weak 1 170 No      
      Weak 2 0 No      
      •    Based on Threshold 1, credit risk add-on of 80 and 60 applies to X and Y respectively.
      •    Both scenarios have to be considered to determine the add-on arising from Threshold 2.
      •    For first scenario (X + Weak 1 + Weak 2), balance of 20 applies.
      •    For X, add-on = 560/(560+180)*20 = 15
      •    For Weak 1, add-on = 180/(560+180)*20 = 5
      •    For Weak 2, add-on = 0
      •    For second scenario (Y + Weak 1 + Weak 2), balance of 10 applies.
      •    For Y, add-on = 560/(560+170)*10 = 8
      •    For Weak 1, add-on = 170/(560+170)*10 = 3
      •    For Weak 2, add-on = 0
      •    Therefore the final add-on is:
      •    For X, add-on = 80 + 15 = 95
      •    For Y, add-on = 60 + 8 = 68
      •    For Weak 1, add-on = higher of (5, 3) = 5
      •    For Weak 2, add-on = 0

      1 Principles for Financial Market Infrastructures issued by the Committee on Payments and Market Infrastructure (CPMI) and the Technical Committee of the International Organization of Securities Commissions (IOSCO)

      2 Threshold 1 and 2 is currently defined as 70% and 90% respectively, but may be revised from time to time.

      3 The threshold is currently defined as 15%, but may be revised from time to time.

      Added on 8 August 2016.

    • Practice Note 7.30 — Enhanced Customer Collateral Protection

      Issue date Cross Reference Enquiries
      Added on 31 December 2013 Rule 7.30 Please contact:

      Operations, Clearing and Depository
      Clearing Hotline Tel: (65) 6236 5319
      Email: otclear@sgx.com

      SGX OTC Clearing Business
      Email: sgxotc@sgx.com

      SGX AsiaClear Commodities Clearing Business
      Email: asiaclear@sgx.com

      1. Introduction

      1.1 Rules 7.30.1 and 7.30.2 provide that a Customer may opt for "Enhanced Customer Collateral Protection" ("ECCP") in respect of Non-Relevant Market Transactions and/or OTCF Transactions by requesting that its Clearing Member designate any of the Customer's Customer Accounts as an "Applicable Customer Account". Each such Customer is referred to as an "Applicable Customer". The Clearing Member shall inform each of its Customers of the availability of the choice for ECCP and shall offer ECCP to any Customer that requests for it.
      1.2 This Practice Note provides information on—
      (a) the requirement on a Clearing Member to inform its Customers of the availability of the choice for ECCP;
      (b) the treatment of position and Collateral under the ECCP model; and
      (c) the key benefits and costs to Customers of opting for ECCP.

      2. Requirement to inform Customers of the availability of the choice for ECCP

      2.1 Clearing Members that offer client clearing for Non-Relevant Market and/or OTCF Contracts are required to inform each of their Customers that the choice for ECCP is available.
      2.2 Clearing Members should retain records of communication between themselves and their Customers, including communication by their Customers on whether they wish to opt for ECCP.

      3. Treatment of position and Collateral under the ECCP model

      Positions

      3.1 Under Rule 7.30.3, the Clearing House will only treat a Customer Account as being an Applicable Customer Account where it has received information relating to the identity of the Applicable Customer from the relevant Clearing Member. This applies to both (i) individual position accounts, and (ii) omnibus position accounts.
      3.2 Where a Customer opts for ECCP, its positions will be maintained on the Clearing House's records on a position account level. Clearing Members are required to maintain separate position accounts for each Applicable Customer by ensuring that each Applicable Customer's trades are correctly booked into the appropriate Applicable Customer Account in the clearing system. The positions of each such Applicable Customer Account will be clearly identified on the Clearing House's books and will not be commingled with other Customers' positions.
      3.3 A customer omnibus position account that is the subject of ECCP will be treated as an Applicable Customer Account and ring-fenced from other Customer Accounts held with SGX-DC. However, each Customer within a customer omnibus position account will remain exposed to the risk of fellow customers within that same customer omnibus position account.

      Collateral

      3.4 The Clearing House will maintain records of Collateral in respect of each Applicable Customer Account. These records will be maintained for the purposes of margining and default management based on information provided by the relevant Clearing Member.
      3.5 The Collateral records in respect of each Applicable Customer Account will be kept separate from the Collateral records of any other Customer Account held with SGX-DC. However, Collateral deposited in respect of Applicable Customer Accounts and non-Applicable Customer Accounts may be physically commingled in an omnibus account held with a bank, custodian or depository.
      3.6 Collateral deposited in respect of all Customer Accounts (including Applicable Customer Accounts) will be kept separate from Clearing House's assets and Clearing Members' assets deposited for house obligations.

      4. Benefits and Costs

      4.1 Clearing Members should advise their Customers of the benefits and costs involved in opting for ECCPin order to facilitate an informed decision by their Customers.
      4.2 ECCPprovides the following key benefits:
      (a) Protection from fellow-customer risk

      Non-Applicable Customers are technically exposed to a degree of risk in the default of another non-Applicable Customer. Section 60(1)(b) of the SFA and Regulation 24(1) of the Securities and Futures (Clearing Facilities) Regulations 2013 ("SFR (Clearing Facilities)") provide that the Clearing House may use Customer Collateral of non-Applicable Customers to meet obligations of a Clearing Member that arise from other non-Applicable Customers' contracts where certain conditions are met.

      In contrast, Applicable Customers are protected from fellow-customer risk because SFR (Clearing Facilities) Regulation 24(2) provides that in the event of a default of a Clearing Member caused by a Customer, Collateral of a non-defaulting Applicable Customer will not be used to satisfy the obligations arising from the Contracts of such defaulting Customer. In the event of a default of a Clearing Member caused by an Applicable Customer, only the Collateral of such defaulting Applicable Customer will be used. Other Customers' Collateral will not be used.
      (b) Ease of porting

      Clear identification of positions and associated Collateral in respect of each Applicable Customer Account enables Clearing House to accurately determine the minimum amount of Collateral each Applicable Customer has to deposit and will potentially expedite the porting of positions and associated Collateral in an event of default.
      4.3 In consideration of the additional protection against fellow-customer risk that Applicable Customers receive, a margin add-on of 10% will be imposed on positions held in respect of Applicable Customer Accounts as compared to non-Applicable Customer Accounts. The differentiation in margining is required due to an Applicable Customer, as a corollary of obtaining protection from fellow-customer risk, no longer having the benefit of non-defaulting Customers sharing in the fulfilment of its obligations if it defaults. Higher margin is therefore required in respect of each Applicable Customer Account to maintain the existing level of safety in the clearing system.

    • Practice Note 7A.02.1.5.c.ii [Rule has been deleted.]

      Deleted on 30 June 2014.

    • Practice Note 7A.01A.2A — Apportionment of Clearing Fund Contributions across Contract Classes and across OTCF auctions

      Issue Date Cross Reference Enquiries

      Added on 30 June 2014.

      Clearing Rule 7A.01A.2A Please contact:

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

      1. Introduction

      1.1. This Practice Note describes:
      i. the apportionment of the Clearing House First Loss Contribution and the Clearing House Intermediate Contribution pursuant to Rule 7A.01A.2A.a across Contract Classes where an event of default is deemed to have occurred in more than one Contract Class;
      ii. the apportionment of the Clearing Fund Deposit and Further Assessment Amount of each Clearing Member pursuant to Rule 7A.01A.2A.b across Contract Classes where an event of default is deemed to have occurred; and
      iii. the further apportionment of the part of the Clearing House First Loss Contribution, Clearing House Intermediate Contribution and Clearing Fund Deposit and Further Assessment Amount of each Clearing Member that is apportioned to OTCF Contracts across auctions, where an event of default is deemed to have occurred in OTCF Contracts and there is more than one auction.
      1.2. In this Practice Note, contracts that are listed for trading on the Exchange or Relevant Market and Non-relevant Market Contracts will be referred to as "ETD and NMC Contracts".

      2. Apportionment of Clearing House First Loss Contribution and the Clearing House Intermediate Contribution across Contract Classes

      2.1. Where there is a default in more than one Contract Class, the Clearing House intends to apportion the Clearing House First Loss Contribution and the Clearing House Intermediate Contribution between (a) OTCF Contracts and (b) ETD and NMC Contracts, in the proportion of Clearing Members' aggregate Clearing Fund Deposits and Further Assessment Amounts for (a) OTCF Contracts, relative to those for (b) ETD and NMC Contracts.

      3. Apportionment of Clearing Fund Deposit and Further Assessment Amount of each Clearing Member across Contract Classes

      3.1. Where there is a default, the Clearing House intends to apportion the Clearing Fund Deposit and Further Assessment Amount of each Clearing Member deposited in respect of OTCF Contracts to OTCF Contracts, and the Clearing Fund Deposit and Further Assessment Amount deposited in respect of ETD and NMC Contracts will be apportioned to ETD and NMC Contracts.

      4. Further apportionment of Clearing House First Loss Contribution, Clearing House Intermediate Contribution, and Clearing Fund Deposit and Further Assessment Amount of each Clearing Member that is apportioned to OTCF Contracts across auctions

      4.1. Where there is a default in OTCF Contracts, a separate auction will be held for each product group of OTCF Contracts. In that event, the Clearing House intends to apportion, across auctions, the part of the Clearing House First Loss Contribution, Clearing House Intermediate Contribution and Clearing Fund Deposit and Further Assessment Amount of each Clearing Member that is apportioned to OTCF Contracts. Such apportionment will be based on the relative risk4 of the defaulted Clearing Member in respect of each product group.

      Added on 30 June 2014 and amended on 12 November 2018.


      1 [Deleted]

      2 [Deleted]

      3 [Deleted]

      4 SGX intends to use relative risk margins as a measurement of relative risk, but may use any other measurement as appropriate.

    • Practice Note 7A.01B — Illustrations of the Application of Clearing Member's Clearing Fund Deposit and Further Assessment Amounts in respect of OTCF Contracts

      Issue Date Cross Reference Enquiries

      Added on 30 June 2014.

      Clearing Rules 7A.01B.3.c, Rule 7A.01B.3.d and Rule 7A.01B.4.a Please contact:

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

      1. Introduction

      1.1. This Practice Note illustrates the use of Clearing Members' Clearing Fund Deposit and Further Assessment Amounts for OTCF Contracts as set out in Rule 7A.01B.3.c, Rule 7A.01B.3.d and Rule 7A.01B.4.

      2. Allocation of loss between Participating Clearing Members which are liable for loss remaining in an auction under Rule 7A.01B.3.c and Rule 7A.01B.3.d

      2.1 When an event of default has occurred in OTCF Contracts and losses remain after the auction(s) referred to in Rule 7A.02.1.5.b, the Clearing Fund Deposit and Further Assessment Amount that are apportioned to OTCF Contracts, of a Clearing Member that is active in OTCF Contracts (as described in Rule 7A.01A.2.b), will be used to meet those losses.1
      2.2 Rule 7A.01B.3 sets out the order of priority in which such funds of such a Clearing Member will be used to meet the losses that remain after an auction. There are three general levels in that order of priority.
      i. The first level is described in Rule 7A.01B.3.a (Clearing Fund Deposits) and Rule 7A.01B.3.b (Further Assessment Amounts). All Clearing Members that are obliged to participate in the auction (i.e., Participating Clearing Members) but that did not submit a bid will fall within this first level.
      ii. The second level is described in Rule 7A.01B.3.c (Clearing Fund Deposits) and Rule 7A.01B.3.d (Further Assessment Amounts). All Participating Clearing Members that bid below the Reference Price2 will fall within this second level.
      iii. The third level is described in Rule 7A.01B.3.e (Clearing Fund Deposits) and Rule 7A.01B.3.f (Further Assessment Amounts). All Clearing Members with Clearing Fund Deposits and Further Assessment Amounts which are apportioned to the auction and which are not available for use pursuant to Rule 7A.01B.3.a, b, c and d, or which have not been exhausted pursuant to Rule 7A.01B.3.c and d, will fall within this third level.
      2.3 Each Clearing Member that is liable in the second level will be liable for the loss remaining on a pro-rata basis, calculated as the proportion of the product of:
      i. the distance between that Clearing Member's bid price and the Reference Price; and
      ii. that Clearing Member's Clearing Fund Deposit/Further Assessment Amount requirement apportioned to OTCF Contracts,
      relative to the aggregate of the product of i and ii for all Clearing Members that is liable in the same second level.
      2.4 By way of illustration, the liability of Participating Clearing Members, A and B, for the loss remaining in an auction will be in the following proportions, assuming the following bidding behaviour:

        Distance of bid from Reference Price (A) Clearing Fund Deposits/Further Assessment Amount requirement apportioned to OTCF Contacts (B) A x B Proportion
      Participating Clearing Member A S$48 million S$10 million 48 x 10 = 480 480 / (480 + 240) = 2/3
      Participating Clearing Member B S$12 million S$20 million 12 x 20 = 240 240 / (480 + 240) = 1/3

      3. Use of unexhausted Clearing Fund Deposit or Further Assessment Amount in another Auction

      3.1. Rule 7A.01B.4.a states that if a Clearing Member is liable to meet losses in the same order of priority in two or more auctions held in respect of an event of default, its unexhausted funds from the first auction will be used in the corresponding source in the other auction(s), but only after the funds in that source apportioned to the other auction(s) have been exhausted.
      3.2. By way of illustration, Participating Clearing Member A ("PCM A") and Participating Clearing Member B ("PCM B") are required to bid in two auctions held in respect of a default in OTCF contracts. The OTCF contribution of PCM A and PCM B that is apportioned to each auction ("auction contribution") is $3m respectively. The bidding behaviour of PCM A and PCM B and the consequent priority of usage of their auction contribution are summarised below:

        KRW NDF auction Losses after auction = $2m INR NDF auction Losses after auction = $20m
      PCM A
      - Bidding behaviour:
      - Priority of usage of auction contribution:
      Did not bid
      First level
      Did not bid
      First level
      PCM B
      • Bidding behaviour:
      • Priority of usage of auction contribution:
      Bid below Ref. Price
      Second level
      Bid below Ref. Price
      Second level


      In such a case:

      i. PCM A's KRW NDF auction contribution ($3m) will be used to fully meet all the losses in the KRW NDF auction ($2m), with $1m remaining. That $1m will be used to meet the losses in the INR NDF auction. As PCM A lies in the first level in both auctions, the $1m will be used in the INR NDF auction, like in the KRW NDF auction, at the first level. However, the $1m will be used only after the INR NDF auction contributions of all Clearing Members that fall within the first level in the INR NDF auction (which would include PCM A) have been exhausted.
      ii. PCM B's KRW NDF auction contribution will not be used because PCM A's auction contributions are more than sufficient to meet the losses in that auction. PCM B's KRW NDF auction contributions ($3m) will be used to meet the losses in the INR NDF auction. As PCM B lies in the second level in both auctions, the $3m will be used in the INR NDF auction, like in the KRW NDF auction, at the second level. However, the $3m will be used only after the INR NDF auction contributions of all Clearing Members that fall within the second level in the INR NDF auction (which would include PCM B) have been exhausted.
      In summary, funds will be used to meet the losses in each auction in the following descending order of priority:

        KRW NDF auction Losses after auction = $2m INR NDF auction Losses after auction = $20m
      First level Part of PCM A's auction contribution ($2m)
      (1) All of PCM A's auction contribution ($3m); then
      (2) PCM A's unexhausted KRW NDF auction contribution ($1m)
      Second level -
      (1) All of PCM B's auction contribution ($3m); then
      (2) PCM B's unexhausted KRW NDF auction contribution ($3m)

      Added on 30 June 2014 and amended on 12 November 2018.


      1 The Clearing Member's funds will be used only if losses still remaining after the defaulting Clearing Member's Clearing Fund contributions and the relevant portion of the Clearing House First Loss Contribution are used.

      2 Unless otherwise notified by the Clearing House, the Reference Price will be the median bid (if there are at least 5 bids submitted by Participating Clearing Members) or the winning bid (if there are fewer than 5 bids submitted by Participating Clearing Members).

    • Practice Note 9.01.1 — OTCF Product Groups

      Issue Date Cross Reference Enquiries

      Added on 30 June 2014.

      Clearing Rule 9.01.1 Please contact:

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

      1. Introduction

      1.1. Rule 7A.02.1.5.b states that, when a Clearing Member having open positions has defaulted upon its obligation to the Clearing House, or has been suspended, the Clearing House may conduct an auction of such open positions in OTCF Contracts, whether hedged or otherwise, and a Participating Clearing Member shall participate in such auction.
      1.2. Rule 9.01.1 defines Participating Clearing Member as a Clearing Member who has cleared or had an open commitment in such product group of OTCF Contracts being auctioned during the three (3) month period preceding and ending on the day of the relevant event of default.
      1.3. This Practice Note explains what is meant by a product group and sets out the OTCF product groups which are cleared through the Clearing House.

      2. Product Group By Currency

      2.1. A product group means a distinct group of OTCF Contracts in a specified currency for which the Clearing House offers clearing services.
      2.2. The different product groups cleared by the Clearing House are as follows:
      •    Singapore Dollar interest rate swap
      •    US Dollar interest rate swap
      •    Thai Baht non-deliverable interest rate swap
      •    Malaysian Ringgit non-deliverable interest rate swap
      •    Chinese Yuan non-deliverable foreign exchange forward
      •    Indian Rupee non-deliverable foreign exchange forward
      •    Indonesian Rupiah non-deliverable foreign exchange forward
      •    Korean Won non-deliverable foreign exchange forward
      •    Malaysian Ringgit non-deliverable foreign exchange forward
      •    New Taiwan Dollar non-deliverable foreign exchange forward
      •    Philippine Peso non-deliverable foreign exchange forward

      Added on 30 June 2014.