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SGX Enhances Default Management Framework of Derivatives Market

Singapore, July 23, 2012 – (ACN Newswire) – Singapore Exchange (SGX) is enhancing the rules to strengthen its default management framework to protect its derivatives market against systemically destabilising events, which include the possibility of multiple member defaults. This enhancement follows a public consultation issued in September 2011.

Clearing Houses globally have been called upon to provide greater clarity and transparency in their default management practices. Their members would like to have more certainty with regard to their obligations in the event of default of other participants.

The move to make it mandatory to clear over-the-counter (“OTC”) derivatives through a central counterparty (“CCP”) by early 2013, concentrates more risks in CCPs and increased participation of global institutions in CCP clearing raises the risk of contagion effects arising from the interconnectedness of financial markets. SGX is making a timely change in anticipation of expansion in the scope of its clearing business and to address the needs of its members.

The rule enhancements include the following:

– Establishing the Clearing Member’s liabilities in circumstances of multiple defaults (i.e. where several defaults occur in quick succession) if the Clearing Member resigns.

– Allowing SGX-Derivatives Clearing (“SGX-DC”) to apply the Clearing Fund continually to meet the losses arising from all defaults which occur within a fixed period of 90 days.

– Various clarifications and refinements to SGX-DC’s powers in managing a default, including clarifying SGX-DC’s authority to transfer and manage customer positions and margins from the defaulted Clearing Member to a non-defaulting Clearing Member.

The rule enhancements that will be effective on 7 August 2012 and details will be available on SGX websitewww.sgx.com.

About Singapore Exchange (SGX)

Singapore Exchange (SGX) is the Asian Gateway, connecting investors in search of Asian growth to corporate issuers in search of global capital. SGX represents the premier access point for managing Asian capital and investment exposure, and is Asia’s most internationalised exchange with more than 40% of companies listed on SGX originating outside of Singapore. SGX offers its clients the world’s biggest offshore market for Asian equity futures market, centred on Asia’s three largest economies – China, India and Japan.

In addition to offering a fully integrated value chain from trading and clearing, to settlement and depository services, SGX is also Asia’s pioneering central clearinghouse. Headquartered in Asia’s most globalised city, and centred within the AAA strength and stability of Singapore’s island nation, SGX is a peerless Asian counterparty for the clearing of financial and commodity products. For more information, please visit www.sgx.com.

Contact:

Joan Lew
Tel: +65 6236 8658      
Email: joan@sgx.com

Carolyn Lim
Tel: +65 6236 8139      
Email: Carolyn.lim@sgx.com


Source: Singapore Exchange (SGX)

Topic: Production report
Sectors: Financial General
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