Issue Date | Cross Reference | Enquiries |
Amended on 2 July 20072 July 2007, 16 July 201216 July 2012, 28 October 201328 October 2013, 19 January 201519 January 2015, 14 November 201614 November 2016, 21 August 201721 August 2017. | Rule 4.1.8 | Please contact: Derivatives for policy issues: Telephone No. : 6236 8888 Derivatives Market Control ("DMC") for operational issues: Telephone No. : 6236 8433 Facsimile No.: 6536 6480 Email address : derivatives.mc@sgx.com |
1 Introduction
2 Error Trade Policy Applicable to Contracts Traded on the SGX-DT Market
Futures Contracts
Refer to Appendix A of Regulatory Notice 4.1.8.
For designated Futures Contracts, it is possible to establish a fairly accurate dynamic reference price when the underlying cash market is open. Therefore, the Exchange will apply a smaller error trade price range, with reference to the dynamic futures reference price. A dynamic futures reference price may be calculated as follows:
This example uses the Yen-denominated SGX Nikkei Stock Average Futures Contract. Based on an evaluation of historical data the Exchange could set the following:
Error Trade Price Range of +/- 50 points for the spot quarter month
Error Trade Price Range of +/- 100 points for other contract months
The spot quarter month has a narrower error trade price range because its dynamic futures reference price, calculated using market traded prices, will be relatively accurate. The other contract months have a wider error trade price range because the dynamic futures reference price would likely have a theoretical component. A wider range is needed to ensure that bona-fide trades do not fall within the error trade price range. The Exchange may periodically adjust the error trade price range to reflect prevailing market conditions. DMC will broadcast the necessary information to Members in accordance with sub-paragraph 2.2.10.
Based on the dynamic futures reference price, an erring party's losses from error trades should be limited to fifty (50) points (¥25,000) per lot in the spot quarter month or one hundred (100) points (¥50,000) per lot in other contract months.
For designated Option Contracts, it is possible to establish a fairly accurate dynamic futures reference price when the underlying cash market is open. The option error trade price range is calculated using a theoretical option pricing model with variables including the dynamic reference price of the underlying Futures Contract and a volatility range.
This example uses the SGX Option Contract on Nikkei Stock Average Futures. The Exchange could set the following volatility range (with reference to the previous day settlement implied volatility):
Within 1,000 points from at-the-money | Other Strikes | |
Spot Month | +/- 4% | +/- 6% |
Other Months | +/- 5% | +/- 8% |
The option reference price will be calculated using the option pricing model with variables including the dynamic futures reference price of the underlying Futures Contract and the previous day settlement implied volatility.
In addition, the option error trade price range is subject to a minimum level (to prevent frivolous price adjustments) and a maximum level (to cater to special circumstances for Option Contracts).
This example uses the SGX Option Contract on Nikkei Stock Average Futures. Based on evaluation of its historical data, the Exchange could set:
Maximum price range of | +/- 100 points for contracts with 6 months or less to expiry |
+/- 200 points for other contract months | |
Minimum price range of | +/- 30 points |
The Exchange may apply the maximum price range to all Option Contracts that are more than 1,500 points in-the-money and all expiring options on the Monday of the week of expiration to the Last Trading Day. Deep in-the-money Option Contracts have high delta and thus the price change largely mirrors the price change of the underlying. It is thus appropriate to use a fixed error trade price range. In addition, as the Option Contract approaches expiry, small changes in traded option prices cause relatively large changes in traded implied volatility. The result is that the volatility range may not be sufficient to encompass the volatility changes near the expiry of the contract. Based on historical data, the traded implied volatility of the Option Contract would start to change rapidly during the week of expiration. Hence, the maximum price range will generally be imposed during this period. The Exchange may adjust, with prior notice, the maximum price range and applicable circumstances as market conditions change.
If the Exchange deems the error trade to be serious, it may charge a higher amount than the Administrative Fee.
Amended on 16 July 201216 July 2012, 28 October 201328 October 2013, 19 January 201519 January 2015, 14 November 201614 November 2016 and 21 August 201721 August 2017.
1 A Trading Member intending to report an error trade shall do so via its Clearing Member's authorised co-ordinator.
Appendix A To Regulatory Notice 4.1.8
Designated Futures Contracts
S/no. | Futures Contract |
1 | Australian Dollar (AUD) / Japanese Yen (JPY) Futures |
2 | Australian Dollar (AUD) / US Dollar (USD) Futures |
3 | Chinese Yuan (CNY) / Singapore Dollar (SGD) Futures |
4 | Chinese Yuan (CNY) / US Dollar (USD) Futures |
5 | Euro (EUR) / Chinese Offshore Yuan (CNH) Futures |
6 | Indian Rupee (INR) / US Dollar (USD) Futures |
7 | Korean Won (KRW) / Japanese Yen (JPY) Futures |
8 | Korean Won (KRW) / US Dollar (USD) Futures [Mini size] |
9 | Korean Won (KRW) / US Dollar (USD) Futures [Full size] |
10 | SGD Dollar (SGD) / Chinese Offshore Yuan (CNH) Futures |
11 | Taiwan Dollar (TWD) / US Dollar (USD) Futures [Mini size] |
12 | Taiwan Dollar (TWD) / US Dollar (USD) Futures [Full size] |
13 | Thai Baht (THB) / US Dollar (USD) Futures |
14 | US Dollar (USD) / Chinese Offshore Yuan (CNH) Futures [Mini size] |
15 | US Dollar (USD) / Chinese Offshore Yuan (CNH) Futures [Full size] |
16 | US Dollar (USD) / Japanese Yen (JPY) Futures [Standard size] |
17 | US Dollar (USD) / Japanese Yen (JPY) Futures [Titan size] |
18 | US Dollar (USD) / Singapore Dollar (SGD) Futures [Mini size] |
19 | US Dollar (USD) / Singapore Dollar (SGD) Futures [Full size] |
20 | Yen-denominated Nikkei Stock Average Futures |
21 | Indonesian Rupiah (IDR) / US Dollar (USD) Futures |
22 | Malaysian Ringgit (MYR) / US Dollar (USD) Futures |
23 | Malaysian Ringgit (MYR) / Singapore Dollar (SGD) Futures |
24 | Philippine Pesos (PHP) / US Dollar (USD) Futures |
25 | US Dollar (USD) / Indian Rupee (INR) (USD) Futures |
26 | US Dollar (USD) / Indian Rupee (INR) (USD) Month-end Futures |
27 | Brazilian Real (BRL) / US Dollar (USD) Futures |
Designated Option Contracts
S/no. | Option Contract |
1 | Option on SGX Indian Rupee (INR) / US Dollar (USD) Futures |
2 | Option on SGX US Dollar (USD) / Chinese Offshore Yuan (CNH) Futures [Full size] |
3 | Option on Yen-denominated Nikkei Stock Average Futures |
4 | Option on SGX US Dollar (USD) / Indian Rupee (INR) (USD) Futures |
Amended on 11 November 201311 November 2013, 20 October 201420 October 2014, 31 August 201531 August 2015, 11 July 201611 July 2016, 5 December 20165 December 2016, 17 July 201717 July 2017, 16 March 202016 March 2020, 20 July 202020 July 2020, 14 September 202014 September 2020, 23 November 2020, 10 May 2021, 15 November 2021, 24 January 2022, 2 December 2024 and 9 June 2025.