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SGX RegCo proposes changes to CDP margining and Clearing Fund

The Editor
·1-min read

The public consultation can be found on SGX’s website. It will close on Dec 5.

The Singapore Exchange Regulation (SGX RegCo) is consulting the market on proposing changes to the Central Depository’s (CDP) margining framework and the CDP Clearing Fund.

The CDP collects margins and Clearing Fund contributions to mitigate the impact on the rest of the financial system, should a Clearing Member default on its payments.

In its Nov 3 statement, the SGX RegCo has proposed to offer differentiated margin changes for groups of securities with different risk profiles. This is so that margins will commensurate more closely with the level of risk brought to the system. Under the proposed margin changes, the SGX RegCo is also looking to introduce margin offsets for greater efficiency. Finally, the market regulator is proposing to enhance anti-procyclicality measures to better temper sudden margin increases.

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Under the changes to the CDP Clearing Fund, the SGX RegCo is proposing to change the approach for sizing the Clearing Fund and Clearing Members’ contribution so that they will move more dynamically in tandem with the level of risk brought to the clearing system.

The changes also include deferring the use of Clearing Members’ contingent contributions until after all other sources of the Clearing Fund have been used. In addition, the SGX RegCo is proposing to place a cap on Clearing Members’ Clearing Fund liability to give them certainty on their maximum exposure.

The public consultation can be found on SGX’s website. It will close on Dec 5.

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