Whole Section

  • 6.2 Clearing and Novation

    Amended on 10 December 201810 December 2018.

    • 6.2.1

      Subject to Rule 6.2.1A, when a transaction between 2 SGX-ST Trading Members is matched on the Trading System, or is reported to SGX-ST pursuant to the SGX-ST Rules on "Direct Business", or is otherwise accepted for clearing by the CDP, the following occurs:—

      (1) Where the 2 SGX-ST Trading Members are both Clearing Members, the transaction shall be novated to CDP and Rules 6.2.2, 6.2.3 and 6.2.4 will apply.
      (2) Where 1 of the 2 SGX-ST Trading Members is a Trading only Member, the Clearing Member who has qualified the Trading Member shall, as against the Trading Member, assume the rights, duties and obligations of the counterparty SGX-ST Trading Member to the transaction; i.e. the Clearing Member who has qualified the Trading Member shall become the buyer or seller, as the case may be, to the Trading Member. As against the counterparty SGX-ST Trading Member, the Clearing Member who has qualified the Trading Member shall assume the rights, duties and obligations of the Trading Member and the transaction shall thereupon be novated to CDP and Rules 6.2.2, 6.2.3 and 6.2.4 shall apply. Thus, for example:— A, a Trading Member, contracts to buy 1,000 shares and the trade is matched on the Trading System with B, a Clearing Member. The Clearing Member who has qualified A is C. Immediately upon the matching of the trade on the Trading System, the following occurs:—
      (a) A's obligation to pay the purchase consideration for 1,000 shares to B is replaced by A's obligation to pay the purchase consideration for 1,000 shares to C and A's right to receive 1,000 shares from B is replaced by A's right to receive 1,000 shares from C.
      (b) B's obligation to deliver 1,000 shares to A is replaced by B's obligation to deliver 1,000 shares to C and B's right to receive the purchase consideration for 1000 shares from A is replaced by B's right to receive the purchase consideration for 1,000 shares from C.
      (c) C assumes A's obligation to pay the purchase consideration for 1,000 shares to B and acquires the corresponding right to receive 1,000 shares from B.
      Thereafter, the transaction between C and B is novated to CDP so that:—
      (d) C's obligation to pay the purchase consideration for 1,000 shares to B is replaced by C's obligation to pay the same to CDP; and the corresponding right of C to receive the 1,000 shares from B is replaced by the right of C to receive the 1,000 shares from CDP; and
      (e) B's obligation to deliver 1,000 shares to C is replaced by B's obligation to deliver the same to CDP; and the corresponding right of B to receive the purchase consideration for the 1,000 shares from C is replaced by the right of B to receive the purchase consideration from CDP.
      (3) Where the 2 SGX-ST Trading Members are Trading only Members, the Clearing Members who have qualified the Trading Members respectively shall assume the rights, duties and obligations of the Trading Members to each other and as against the Trading Member which they have respectively qualified, they shall assume the rights, duties and obligations of the counterparty SGX-ST Trading Member to the transaction. Thereafter the transaction shall be novated to CDP and Rules 6.2.2, 6.2.3 and 6.2.4 will apply. Thus, for example:—

      A, a Trading only Member, contracts to buy 1,000 shares and the trade is matched on the Trading System with B, a Trading only Member. The Clearing Member who has qualified A is C. The Clearing Member who has qualified B is D. Immediately upon the matching of the trade on the Trading System, the following occurs:—
      (a) A's obligation to pay the purchase consideration for 1,000 shares to B is replaced by A's obligation to pay the purchase consideration for 1,000 shares to C and A's right to receive 1,000 shares from B is replaced by A's right to receive 1,000 shares from C.
      (b) B's obligation to deliver 1,000 shares to A is replaced by B's obligation to deliver 1,000 shares to D and B's right to receive the purchase consideration for 1,000 shares from A is replaced by B's right to receive the purchase consideration for 1,000 shares from D.
      (c) C assumes A's obligation to pay the purchase consideration for 1,000 shares to D and acquires the corresponding right to receive 1,000 shares from D.
      (d) D assumes B's obligation to deliver 1,000 shares to C and acquires the corresponding right to receive the purchase consideration for 1,000 shares from C.
      Thereafter, the transactions between C and D are novated to CDP so that:—
      (e) C's obligation to pay the purchase consideration for 1,000 shares to D is replaced by C's obligation to pay the same to CDP; and the corresponding right of C to receive 1,000 shares from D is replaced by the right of C to receive 1,000 shares from CDP; and
      (f) D's obligation to deliver 1,000 shares to C is replaced by D's obligation to deliver the same to CDP; and the corresponding right of D to receive the purchase consideration for 1,000 shares from C is replaced by the right of D to receive the purchase consideration for 1,000 shares from CDP.

      Amended on 3 April 20083 April 2008, 23 January 200923 January 2009 and 10 December 201810 December 2018 .

    • 6.2.1A

      For transactions in Marginable Futures Contracts between 2 SGX-ST Trading Members which are reported to SGX-ST pursuant to the SGX-ST Rules on "Direct Business", novation under Rules 6.2.1(1)–(3) shall take place only upon:

      (a) where both Clearing Members receive margin call pursuant to the first margin cycle run following the reporting of the trade, the later in time Confirmation by the Clearing Members' Settlement Bank(s) of the Payment Instructions in respect of the margin calls; or
      (b) where only one Clearing Member receives margin call pursuant to the first margin cycle run following the reporting of the trade, Confirmation by that Clearing Member's Settlement Bank of the Payment Instruction in respect of that margin call; or
      (c) where neither Clearing Member receives margin call pursuant to the first margin cycle run following the reporting of the trade, the end of that margin cycle.

      Added on 23 January 200923 January 2009. Amended on 26 April 201326 April 2013.

    • 6.2.2

      Upon novation of an Exchange Trade to CDP:—

      (1)
      (a) the obligation of the buying Clearing Member to pay the purchase consideration to the selling Clearing Member is replaced by the obligation of the buying Clearing Member to pay the purchase consideration to CDP; and
      (b) the right of the buying Clearing Member to receive the securities from the selling Clearing Member is replaced by the right of the buying Clearing Member to receive the securities from CDP; and
      (2)
      (a) the obligation of the selling Clearing Member to deliver the securities to the buying Clearing Member is replaced by the obligation of the selling Clearing Member to deliver the securities to CDP; and
      (b) the right of the selling Clearing Member to receive the sale consideration from the buying Clearing Member is replaced by the right of the selling Clearing Member to receive the sale consideration from CDP.
    • 6.2.3

      The obligations and rights in respect of the Novated Contracts:—

      (1) between the buying Clearing Member and CDP; and
      (2) between the selling Clearing Member and CDP,

      are owed by and to the parties as principals to each other notwithstanding that the buying and selling Clearing Members may have acted as agents for their respective customers in executing or clearing and settling the relevant Exchange Trade.

      Amended on 23 January 200923 January 2009 and 10 December 201810 December 2018.

    • 6.2.4

      Subject as otherwise provided in these Clearing Rules the terms of the Novated Contracts shall be on the same terms as the relevant Exchange Trade replaced by such Novated Contracts.

      Amended on 23 January 200923 January 2009.