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SGX modifies clearing collateral rules

23 February 2011  |  3563 views  |  0 Source: Singapore Stock Exchange

Singapore Exchange (SGX) today announced enhancements to the structure of The Central Depository (CDP) Clearing Fund to cater to market growth and to strengthen further the robustness of the securities market.

The revised Clearing Fund structure is scalable, linking clearing members' contributions more closely to the level of risk they bring to the clearing system. Their clearing fund contributions will change in line with their securities traded values. Previously, the contributions remain fixed in aggregate.

Under the revised structure, CDP only requires a portion of clearing members' increased contributions to be deposited upfront. Clearing members will be called upon to deposit the remaining contributions under conditions of increased risk or to meet losses arising from clearing member default.

In addition to regular clearing requirements, SGX is also introducing collateral on short-term large exposures. The large exposure collateral will better protect the clearing system against the default of individual clearing members with particularly large risks.

An extensive public consultation exercise was conducted in 2009. SGX has incorporated feedback from the market participants and received broad support from its securities clearing members in bolstering the financial resources to safeguard the clearing system against default of securities clearing members.

The enhancements and accompanying changes to the CDP Clearing Rules will take effect from 3 May 2011.

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