SGX enhances Default Management Rules

SGX is proposing to amend the SGX-DC Clearing Rules to:

introduce an auction protocol for liquidating a defaulted SGX-DC Clearing Member’s positions in exchange-traded derivatives contracts and over-the-counter commodities contracts (“ETD/OTCC Auction”), and a loss distribution mechanism to address losses arising from such an auction;

allow SGX-DC to unilaterally terminate positions of non-defaulting SGX-DC Clearing Members that exactly offset those of the defaulted Clearing Member for all classes of contracts SGX-DC clears;

revise the existing loss distribution mechanism for auctions for over-the-counter financial derivatives contracts (“OTCF Auction”); and

modify the SGX-DC Clearing Fund “waterfall” which allocates losses arising from a Clearing Member default, by incorporating “sub-waterfalls” for allocating losses arising from ETD/OTCC and OTCF Auctions.

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