SGX proposes segregation of collateral of derivatives clearing members’ affiliates

Singapore Exchange (SGX) is consulting the public on the proposed introduction of Affiliate Segregation where collateral of an affiliate of an SGX Derivatives Clearing (SGX-DC) member is protected if the member defaults on its own contracts. The affiliate’s positions may also be transferred to another SGX-DC member.

 

The proposed Affiliate Segregation arrangement is optional for SGX-DC members. If an SGX-DC member opts for the arrangement, its affiliates will benefit from a higher level of protection in the event the member defaults.

 

Affiliate Segregation will complement any arrangement that members may have in place to help their bank affiliates achieve greater capital efficiency under Basel III. Under Basel III, a bank must maintain adequate capital for its exposure to a central counterparty.  The amount of capital required depends on the level of protection the bank has from a default or insolvency of its clearing member and the clearing member’s other clients.

 

SGX seeks views and comments on:

  • Proposed introduction of Affiliate Segregation
  • Proposed amendments to the SGX-DC Clearing Rules and Futures Trading Rules.

 

The public consultation is open till 4 September 2015 and is available at www.sgx.com. Responses can be sent to: