SGX proposes remote membership for clearing of US customers’ swaps

In response to Dodd-Frank Act revisions.

Singapore Exchange (SGX) announced that it is consulting the market on a new remote membership class, which will enable futures commission merchants registered with the US Commodity Futures Trading Commission (CFTC) to clear swaps for existing and new US customers through SGX’s derivatives clearing house, SGX Derivatives Clearing.

This follows regulatory changes in the US under the Dodd-Frank Act, which requires that US customers clearing swaps do so through a clearing house registered with the CFTC as a derivatives clearing organisation and through clearing members who are futures commission merchants.

SGX Derivatives Clearing has applied to the CFTC for registration as a derivatives clearing organisation and currently enjoys no-action relief for its clearing activities in the US pending registration.

This new remote membership class further enables SGX Derivatives Clearing to admit futures commission merchants as clearing members and to clear swaps for these merchants’ customers.

While this proposal is initially aimed at meeting US regulatory requirements, SGX Derivatives Clearing may admit members of other jurisdictions as remote clearing members in the future.

In addition to the US regulatory application, SGX Derivatives Clearing and SGX’s securities depository, The Central Depository, have also applied under European regulations to conduct their clearing businesses in the EU.

Other SGX initiatives amid international regulatory changes include SGX's adoption on 8 January 2013 of the latest global standards for payment, clearing and settlement, the Principles for Financial Market Infrastructures. SGX Derivatives Clearing is also a Qualifying Central Counterparty under the Basel III framework for banks, enabling bank members to benefit from lower capital requirements.