SGX wants wider participation in OTCF derivatives clearing

Proposes to admit GCMs for OTCF contracts requiring MAS regulated holding company and S$100mln Base Capital.

Singapore Exchange (SGX) is consulting the public on its proposal to extend its Central Counterparty Clearing Services for Over-the-Counter Traded Financial Derivative (OTCF) contracts to participation from non-bank financial institutions.

On 21 April 2010, SGX made a proposal to allow Bank Clearing Members (BCMs) to participate in the clearing of OTCF contracts through SGX-DC. SGX is now proposing to admit non-bank financial institutions as General Clearing Members (GCMs) to clear their proprietary positions in similar contracts once admission and other relevant requirements are satisfied, according to an SGX report.

The admission of GCMs to clear OTCF contracts is subject to the following additional requirements:

(a) a holding company which is a bank regulated by the Monetary Authority of Singapore (MAS) or recognised foreign financial authority. The parent bank must maintain at least S$1 billion in shareholders’ funds and meet the minimum credit rating requirements; and

(b) Base Capital Requirements of S$100 million. This increased requirement is to ensure that proprietary risks are backed by higher capital in Singapore.

By admitting this new class of members for OTCF Clearing, the benefits of Central Counterparty Clearing Services can be made available to a larger segment of the OTC market.