SGX Rulebooks
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1. Introduction

1.1

Rule 3.10.9 requires a Trading Member to review all margin financing accounts carried on its books daily to ensure that credit is not over-extended beyond the approved facility limits and that the margin financing requirements and limits prescribed in Rule 3.10 are met at all times. The Rule also requires the Trading Member to establish and maintain a robust framework to govern the conduct of such reviews.

Added on 1 April 2025.

1.2

This Practice Note sets out SGX-ST’s expectations on the matters that should be included in the framework.

Added on 1 April 2025.

2. Margin Financing Review Framework

2.1

To ensure that the review of margin financing accounts is robust, the framework include at least the following:

  1. Policies and procedures to be put in place for determining the suitability and valuation of acceptable collateral;
  2. Concentration limits to be set at security and single customer level to prevent the firm from taking on excessive risks;
  3. Performance of timely monitoring of adverse news and market developments to identify potential matters that may impact the valuation of collaterals (e.g. trade with caution alerts, trade suspension, corporate actions); and
  4. Performance of daily mark to market of margin collateral and daily margin calls to restore margin ratios.
 

Added on 1 April 2025.

2.2

The Trading Member should review its policies at least annually and during times of market volatility, to ensure the suitability of acceptable collateral and their valuation.

Added on 1 April 2025.

2.3

For the purposes of paragraph 2.1, “single customer” shall have the same meaning ascribed to it in Rule 3.6.6.

Added on 1 April 2025.

2.4

The framework should provide, for the purpose of computing margin financing requirements in a margin financing account, that:

  1. all transactions done on the same day shall be combined on a transaction date basis;
  2. the total cost of purchase or the net proceeds of sale, including any commission charged and other expenses, shall be taken into account; and
  3. the Trading Member may use either:
    1. the last done price of the Specified Product on the preceding Market Day, or in the case of a Prescribed Instrument, the closing price of the Prescribed Instrument on the preceding Market Day, or
    2. the market price of the Specified Product at the point of calculation on the current Market Day. Where the Trading Member uses real-time market prices for margin valuation, computation of margin financing requirements and issuance of margin calls where required should be carried out at the same time.
 

Added on 1 April 2025.

2.5

The framework should require that there be a determination of the suitability and valuation of the margin collateral in a margin financing account and require that the following factors be taken into account for that purpose:

  1. type and quality of margin collateral;
  2. price volatility of margin collateral;
  3. where the margin collateral is listed or traded in a foreign jurisdiction or is cash in a foreign currency, matters such as:
    1. exchange rate volatility,
    2. ease of liquidating collateral in the foreign jurisdiction, and
    3. differences in legal and regulatory framework between such foreign jurisdiction and Singapore; and
  4. where the margin collateral is custodised in a foreign jurisdiction, matters such as:
    1. risks arising from differences in custody arrangements in such foreign jurisdiction; and
    2. treatment of, or legal protection afforded to, customer collateral in the foreign jurisdiction, e.g. prohibition of title transfer for retail customer collateral.
 

Added on 1 April 2025.