| Issue Date | Cross Reference | Enquiries |
| Added on 22 September 2006. | Rule 3.3.14(g) | Please contact Member Supervision: Facsimile No : 6538 8273 E-Mail Address: membersup@sgx.com |
1. Introduction
This Regulatory Notice sets out the internal controls and risk management procedures as required under Rule 3.3.14(g).
2. Requisite Internal Controls and Procedures
2.1 A Member shall have proper internal controls and risk management procedures to ensure that:
(a) the limit on the amount of margin credit granted to a Customer shall be set, approved and regularly reviewed by an authorised staff independent of trading, dealing and marketing functions;
(b) in setting the limit on the amount of margin credit granted to a Customer, the Member shall take into account possible Maintenance Margin calls and settlement variation losses to be paid to the Clearing House and any other relevant clearing house;
(c) it strictly observes the limit on the amount of margin credit granted to each Customer; and
(d) it has proper systems and control procedures to monitor, on a daily basis, the usage of margin credits and the adequacy of its liquidity facilities (bank lines and cash balances) to meet obligations arising from positions held with the Clearing House and any other relevant clearing house, including:
(i) daily monitoring of each Customer's intra-day and end-of-day use of margin credits to ensure that the limit on the amount of margin credit used is not breached;
(ii) daily monitoring of all Customers' aggregated intra-day and end-of-day use of margin credits to ensure that the Member's liquidity facilities (bank lines and cash balances), after setting off the Customers' aggregate use of margin credits, are adequate to meet the potential mark-to-market loss for positions carried at any relevant clearing house (excluding the Clearing House), as well as potential mark-to-market loss equivalent to at least two (2) times the Maintenance Margin for positions carried with the Clearing House;
(iii) generation of reports used for intra-day and end-of-day monitoring in a timely manner and with the following information:
(A) limit on amount of margin credit granted to each Customer;
(B) amount of margin credit used by each Customer;
(C) aggregate limit on amount of margin credit granted for all Customers;
(D) aggregate amount of margin credit used by all Customers;
(E) available liquidity facilities (bank lines and cash balances); and
(F) excess liquid facilities, after setting off the Customers' aggregate use of margin credits;
and
(e) remedial procedures are in place should there be any breach of controls, limits and thresholds.