SGX aims to broaden OTC clearing capabilities
The Singapore Exchange (SGX) has proposed changes to allow
its clearing members to process OTC derivatives amongst a
number of new measures.
Singapore Exchange - Derivatives Clearing (SGX-DC), the exchange's derivatives clearing arm, the will enable clearing members
to clear OTC derivatives for their customers. SGX members were previously only able
to clear proprietary OTC transactions.
The exchange also proposed reducing the minimum share
capital for becoming a client clearing member with SGX-DC, from S$1 billion to S$50
SGX would become Asia’s first exchange to offer client
clearing of OTC derivatives if the changes go ahead, with other proposals put
forward including the introduction of an enhanced customer collateral
protection model to ensure margin is not used in the event
of a default of other customers.
These changes were proposed in a SGX consultation paper
released on Wednesday, and the exchange will welcome comments until 24 October.
Regulators in Europe – via the European market infrastructure regulation – and the US – via the Dodd-Frank Act – have moved to push
trading of OTC derivatives through exchanges and central counterparties.
SGX-DC began clearing proprietary OTC transactions of clearing members in November 2010 and around S$300 billion in notional value
of interest rate swaps has been cleared since then.
Meantime, SGX began offering trading in the MSCI Indonesia Index Futures Contract to
US traders through its direct access terminals as of Tuesday this week, after
receiving clearance from the Commodity Futures Trading Commission’s Division of