| 0. Overview | |
| 0.0 Date Finalised and Effective Date | Date Finalised: March 31, 2024Date of Most Recent Update: NA |
| 0.1 Products Cleared | ServicePost-trade clearing, risk management and settlement services for Abaxx Exchange Pte Ltd (the “Exchange”) (the “Service“)ProductsBased on the CCP’s website and the Rulebook (as defined below), the CCP provides under the Service the clearing and settlement of contacts or transactions which are eligible for trading on the Exchange and which are accepted for clearing and settlement by the CCP, which comprise centrally cleared, physically delivered futures contracts and derivatives in “Commodities”. “Commodity” is defined in the Rulebook to include:any “commodity” as defined in the SFA;any index;any “financial instrument” as defined in the SFA;gold, freight, any class of oil or any other physical commodity; andany commodity as may be specified by the Exchange or the CCP from time to time.The CCP has announced that the initial focus of the Exchange is on physically settled futures contracts for liquefied natural gas, battery metals (such as nickel sulphate) and carbon credits.All responses apply to all limbs/contract classes, unless otherwise specified. |
| 0.2 Other products and clearing services of the CCP | N/A. |
| 0.3 Regulators & Key Statutes/Regulations | Regulators:Monetary Authority of Singapore. Key statutes and regulations:The CCP is subject to the SFA, the Companies Act 1967 (the “Companies Act”), the Insolvency, Restructuring and Dissolution Act 2018, the Monetary Authority of Singapore Act 1970 and the Financial Services and Markets Act 2022. The Financial Services and Markets Act (“FSMA”) is an omnibus Act for the sector-wide regulation of financial services and markets. The FSMA is being implemented in phases. The first phase which commenced on 28 April 2023 relates to the porting of the following provisions from the Monetary Authority of Singapore Act: (a) general powers over financial institutions, including inspection powers, offences and other miscellaneous provisions; (b) anti-money laundering/countering the financing of terrorism framework; and (c) financial dispute resolution schemes framework. The remaining phases (which will port over resolution powers over financial institutions) are targeted to be implemented sometime in 2024. |
| 0.4 US/EU registration Status | US registration status:N/A. EU authorization/recognition status: N/A. |
| 0.5 QCCP status | The CCP is licensed by the MAS as an approved clearing house under the Securities and Futures Act 2001 (the “SFA“). |
| 0.6 Documents Reviewed | 1. the “Rulebook” 12. the “Clearing Procedures” 23. Abaxx Membership Application Form 34. Abaxx Default Management Playbook 4Hide note1. Abaxx Clearing Rulebook; March 2024, https://www.abaxx.exchange/regulation-clearing-rulebook-procedures2. Abaxx Clearing Procedures; March 2024, https://www.abaxx.exchange/regulation-clearing-rulebook-procedures3. Abaxx Membership Application Form; June 2023, The Abaxx Membership Application Form is not publicly available on the Abaxx website. Prospective applicants would need to contact Abaxx for the relevant application form.4. Abaxx Default Management Playbook; 16 February 2024, The Default Management Playbook is not publicly available on the Abaxx website. Prospective applicants would need to contact Abaxx for a copy. |
| 0.7 Reviewing Law Firms | Primary Reviewer: Milbank LLPSingapore law advice: Allen & Gledhill LLP |
| 1. Governing law | |
| 1.1 What is the governing law of the Rules? | Singapore law.Hide noteRule 213 (Choice of Law), Rulebook |
| 1.2 What is the governing law of the Contracts? | The governing law of each Contract will be stated in the relevant chapter in the rulebook of the Exchange which sets out the contract specifications for the Contract. |
| 2. Language(s) of the Rules | |
| 2.1 In which language are the Rules written? | English only. |
| 2.2 If the Rules are in more than one language, which one governs? | N/A. |
| 3. Branches or operations in other jurisdictions | |
| 3.1 In what jurisdiction(s) other than its home jurisdiction does the CCP have branches or operations? | None. |
| 3.2 If the CCP has branches or operates in multiple jurisdictions, please describe any CCP Rules pertaining to conflict of laws or choice of law. | N/A. |
| 4. Legal opinions | |
| 4.1 Are any legal opinions or any other form of legal comfort in relation to any of the following publicly available? | No. There are no publicly available legal opinions or other form of legal writings regarding any material aspects of the CCP’s activities.Enforceability of the Rules (including settlement finality issues)No.Close-out netting in the event of a CM default (including in the context of or outside of insolvency)No.Close-out netting in the event of a CCP default (including in the context of or outside of insolvency)No.Bankruptcy remoteness of initial marginNo.IAS 32 issuesNo.Characterization and enforceability of variation marginNo. |
| 4.2 If not publicly available, are legal opinions or other form of legal comfort available if CMs take certain steps (e.g., sign a confidentiality agreement)? | There are no other legal opinions or forms of legal comfort available. |
| 5. CM legal opinions | |
| 5.1 Is a CM required to deliver opinions regarding the enforceability of the Rules against the CM in the CM’s jurisdiction? | A CM is not required to deliver opinions on enforceability of the Rules against it.If a CM applicant intends to conduct its CM activities from a jurisdiction other than Singapore, it is required to provide a legal opinion that there are no legal or regulatory restrictions on it accessing the trading and clearing facilities of Abaxx from that jurisdiction.If the applicant is a licensed entity incorporated outside Singapore and does not have operations in Singapore, it is required to provide a legal assessment on how it meets the conditions of the licensing exemption in regulation 4 of the Securities and Futures (Exemption from Requirement to Hold Capital Markets Services Licence) Regulations, which exempts certain entities which are not financial institutions and which do not serve customers in Singapore from the requirement to hold a capital markets services licence in Singapore.Hide noteItem 3(c) and Item 8(a), Membership Application Form |
| 6. CMs incorporated in different jurisdictions to the CCP | |
| 6.1 Are CMs not incorporated in the jurisdiction of the CCP permitted? | Yes. Nothing in the Rules prohibits entities that are incorporated in jurisdictions other than that of the CCP from becoming CMs.Hide noteRule 201 (Minimum Qualifications and Responsibilities), Rulebook |
| 6.2 If so, is such a CM subject to any licensing or registration requirements in the jurisdiction of the CCP as a result of its status as a CM of the CCP? | Yes, a CM must have in place all necessary regulatory authorisations, licences, permissions and approvals in Singapore and any other jurisdiction(s) in which it conducts business.See also item 11.2 in relation to licensing requirements under the Rules.Hide noteRule 201 (Minimum Qualifications and Responsibilities), Rulebook |
| 7. Forum selection and submission to jurisdiction | |
| 7.1 Describe any CCP rules pertaining to forum selection and submission to jurisdiction. | Any dispute which cannot be settled through good faith negotiations must be referred for final and binding resolution by arbitration at the Singapore International Arbitration Centre (the “SIAC”), in accordance with the Arbitration Rules of the SIAC for the time being in force.Hide noteRule 213 (Choice of Law), Rulebook |
| 8. Dispute resolution | |
| 8.1 Describe the dispute resolution provisions in the Rules, if any. | Dispute regarding ContractsMembers agree to settle any disputes arising out of, or in connection with, the CCP through good faith negotiations. If the dispute cannot be settled through good faith negotiations, it must be referred for final and binding resolution by arbitration at the SIAC, in accordance with the Arbitration Rules of the SIAC for the time being in force.Disciplinary DisputesAll disputes relating to the outcome of any disciplinary proceeding may be appealed by CMs to the Appellate Panel, whose decision shall be a final decision of the CCP.Hide noteRule 213 (Choice of Law) and Rule 803 (Disciplinary Proceedings), Rulebook |
| 9. CCP disclaimers | |
| 9.1 Describe any disclaimers of the CCP’s liability set out in the Rules. | The below are disclaimers of the CCP’s liability set out in the Rules.General disclaimersYes. The CCP shall have no liability, obligation, or duty to any CM, any of their Customers, settlement bank, custodian or any third party, including but not limited to, as a result of:any Force Majeure Event;any losses or damages, including consequential losses and damages, incurred by any CM (or any other person) that arises directly, or indirectly, from the activities and functions of, or any transactions undertaken by, the CCP;any failure, omission or error on the part of the CCP, including any losses or damages with respect to clearing and settlement on the CCP, or suspension, interruption, cancellation or closure or cessation of services of the CCP or any market whose contracts are cleared by the CCP, or any inoperability or malfunction of equipment, software or any other product operated, supplied or used by the CCP;any discharge of the CCP’s duties under the Rules or its regulatory responsibilities or powers, including any decision regarding the status or suspension of a CM; orthe failure to exercise any discretion, powers or rights under the Rules.1Unless otherwise expressly provided in the Rules or in any other agreements to which the CCP is a party, the CCP shall not be liable to any person for any loss (consequential or otherwise, including, without limitation, loss of profit), damage, injury, or delay, whether direct or indirect, arising from:any action taken by the CCP reasonably necessary in connection with discharging its legal or regulatory powers or responsibilities (including the suspension, interruption or closure of the CCP) or any action taken to ensure the orderly operation and evolution of the CCP;any failure, malfunction, fault in delivery, delay, omission, suspension, inaccuracy, interruption, termination, or any other event, in connection with the furnishing, performance, operation, maintenance, use of or inability to use all or any part of any of the systems and services of the CCP, or services, equipment or facilities used to support such systems and services, including without limitation electronic order entry/delivery, trading through any electronic means, electronic communication of market data or information, workstations used by participants, price reporting systems and any and all terminals, communications networks, central computers, software, hardware, and firmware relating thereto;any errors or inaccuracies in information provided by the CCP or any of the CCP systems, services or facilities; andany unauthorized access to or unauthorized use of any of the CCP systems, services, equipment, or facilities by any person.1The CCP or any person acting on its behalf, including any director or any member of any committee established by the CCP, shall be immune from any criminal or civil liability for anything done (including any statement made) or omitted to be done with reasonable care and in good faith in the course of, or in connection with, the discharge or purported discharge of its obligations under the SFA or the Rules.1Additionally:The CCP may terminate the membership of a CM upon the occurrence of the CM becoming insolvent or calling a meeting of its creditors, or entering into an arrangement or composition under insolvency laws or suffers winding up, dissolution, or other similar event. Upon such suspension or termination, the CM may request for a final review by the Board (or a delegate committee thereof). The CCP is held harmless and limited in liability always by any CM in relation to a suspension or termination (or a final review thereof).2Members of committees established by the Board shall not be under any liability (except in cases of fraud, bad faith or wilful misconduct) to any CM for any decision or other act or omission of that committee, and the scope of the applicable insurance coverage for director and officer liability will also cover committee members in connection with their duties as committee members.3The CCP shall not be liable to a Customer for any loss sustained by the Customer as a result of a CM closing out positions in the event of a CM’s failure to obtain Margin from the Customer.4The CCP (including members of the Hearing Panel and Appellate Panel) shall not be liable in any way for anything referable to the disclosure of the filing of, or any sanction imposed or other order made by a Hearing Panel or by an Appellate Panel, or any ratified settlement.5Failure to supply dataYes. See general disclaimer above.Suspension of serviceYes. See general disclaimer above.System failureYes. See general disclaimer above.Force majeureYes. See general disclaimer above.Consequential lossYes. See general disclaimer above.NegligenceYes. See general disclaimer above. Please also see “Qualification of Disclaimers” below.Agents/custodians/third partiesYes. See general disclaimer above.Market emergencyYes. See general disclaimer above.Bespoke compressionYes. See general disclaimer above.Foreign trading venuesYes. See general disclaimer above.Statute of limitationsNo.Physical deliveriesYes. The CCP has no obligation or liability to any CM or any other person relating to a failure to fulfil a delivery obligation unless it is notified by the CM that did perform, or was in a position to perform its delivery obligations, that a failure occurred, as soon as possible, but in no event later than the Business Day after the delivery deadline for the respective product, which may be extended by the Exchange, the Board or the Board’s designee.6Default ManagementYes. The CCP shall not be liable to any CM or any third party in respect of any loss, damage, costs, charges and/or expenses and/or liability of whatsoever nature and howsoever arising suffered or incurred by the CM or third party, arising out of or in connection with the declaration or non-declaration of a default by the CCP.7Qualification of disclaimersNo. However, exclusions of negligence liability are generally subject to a reasonableness test under the Unfair Contract Terms Act 1977. Exclusions of contractual liability may also be subject to the Unfair Contract Terms Act 1977.Hide note1 Rule 214 (Limitation of Liability), Rulebook2 Rule 210 (Suspension and Termination), Rulebook3 Rule 401 (General), Rulebook4 Rule 609 (Margin and Segregated Accounts), Rulebook5 Rule 803 (Disciplinary Proceedings), Rulebook6 Rule 703 (Failure to Deliver), Rulebook7 Rule 612 (Default of Clearing Members), Rulebook |
| 10. CM recovery and resolution | |
| 10.1 Do the Rules contain provisions in respect of recovery and resolution procedures for CMs? | Not specifically addressed in the Rules. General business continuity requirements apply. Generally, there are resolution and recovery requirements imposed by the MAS on Singapore financial institutions.Hide noteRule 201(i) (Minimum Qualifications and Responsibilities), Rulebook; Paragraph 12 (Business Continuity Procedures), Clearing Procedures |
| 11 CM categories and membership requirements | |
| 11.1 Are there different categories of membership? | No.Hide noteRule 200 (General), Rulebook |
| 11.2 What are the key requirements to become a member for each category of membership? Please include any operational, financial, or legal requirements. | Minimum Qualifications and ResponsibilitiesAny person that applies for membership must possess all of the following minimum qualifications. This list is not exclusive or exhaustive, and must be read in the context of the Rulebook and any member agreement with the CCP.The applicant must be in good standing with relevant experience and have a physical place of business in Singapore.The applicant must not be or have been suspended or expelled from any exchange, clearing house, self-regulatory organisation or other business or professional association; and neither the applicant nor its officers, employees, Representatives and substantial shareholders have been convicted of an offence involving any fraud, dishonesty or financial impropriety.The applicant must agree to be bound by the Rules, and ensures that its officers, Representatives, employees, Customers, agents, and contractors comply with the Rules.The applicant should satisfy the CCP that it, its officers, employees, Representatives and substantial shareholders are fit and proper, in accordance with the criteria set out in the Guidelines on Fit and Proper Criteria issued by the MAS.The applicant has designated at least one (1) Representative to be responsible for and conduct the applicant’s operations on the CCP and such Representative(s) are duly authorised to act on behalf of the applicant and its Customers.The applicant has implemented and maintained appropriate policies, procedures, systems, and controls to supervise the activities of its Representative(s) on the CCP as the case may be.The applicant must have sufficient qualities of financial, compliance and managerial responsibility, operational capacity, business integrity, reputation and competence as the CCP, in its sole and absolute discretion, considers necessary or appropriate and satisfy the CCP that its officers, employees and Controllers also satisfy such requirements, including having adequate separation policies to mitigate concentration risk of critical business functions and compliance oversight in place to enable it to meet its obligations as a CM.The applicant must satisfy the internal stringent credit criteria established by the CCP, such satisfaction to be confirmed by an examination of its books and records.The applicant should have appropriate business continuity arrangements in place to enable it to meet its obligations as a CM and any requirements imposed by applicable laws.The applicant must have in place all necessary regulatory authorisations, licences, permissions and approvals in Singapore and any other jurisdiction(s) in which it conducts business.In relation to Contracts, the applicant should have a sufficient level of knowledge about the types of Contracts that it intends to clear and any risks involved in relation to the same; and demonstrate operational competence in respect of the classes of Contracts that it proposes to clear.Financial RequirementsAdditionally, each CM shall comply with any financial requirements as may be imposed by the Exchange and the CCP from time to time. The minimum capital requirement for CMs which are (1) incorporated in Singapore and (2) incorporated outside of Singapore is S$5 million.In relation to CMs which are Banks:The CM shall demonstrate its ability to meet the minimum capital requirement according to how the relevant terms are defined in the SF(FMR)R.The minimum capital requirement may be disapplied by the CCP where S$5,000,000 (by way of Collateral) is deposited by such CM with the CCP. For the avoidance of doubt, Collateral deposited for the purpose of the minimum capital requirement shall not be offset or netted with, or used as a substitute for, Collateral deposited as Margin or as a contribution to the Guaranty Fund.The CCP may in its sole discretion grant an exemption from the financial requirements above to any CM or prescribe any conditions for exemption.Hide noteRule 201 (Minimum Qualifications and Responsibilities), Rule 202 (Financial Requirements and Financial Emergencies), Rulebook |
| 11.3 What documents must CMs sign or agree to in order to be a CM? | Every applicant must agree to be bound by the Rules.Further, every applicant must:complete the prescribed membership application form;consent to and undergo background checks and technical conformance tests; andprovide such other documents and information as may be requested by the CCP.The applicant must ensure that all information and documents provided for the purposes of the application are and remain true, accurate, complete, and not misleading throughout the application process and, if the applicant is successfully admitted as a Member, the duration of the applicant’s membership. Failure to do any of the foregoing may result in the rejection of that applicant’s application or subsequent revocation of the applicant’s membership status.Hide noteRule 201(c) (Minimum Qualification and Responsibilities), Rule 203 (Application Procedures), Rulebook |
| 11.4 Are exceptions made to these standard requirements and what is the governance process for such exceptions? | Yes. The CCP may in its sole discretion grant an exemption from the financial requirements prescribed in the Rules to any CM or prescribe any conditions for exemption. The Rules do not set out any governance process for the granting of such exemptions.Hide noteRule 202 (Financial Requirements and Financial Emergencies), Rulebook |
| 12. CM evaluation requirements | |
| 12.1 Are CMs required to demonstrate/share how they evaluate and monitor their house and Client related exposure and positions? | Each CM shall have adequate systems and controls to ensure, inter alia, that it has automated systems in place to monitor its compliance with capital and financial requirements set forth in the Rules and automated systems in place to monitor limits on exposures to a single Customer and a single Contract, so as to restrict trading activity or inject additional capital if necessary. Each CM is required to immediately notify the CCP of any infringement of the Rules.The Risk Department of the CCP will monitor the risk exposure of each CM and may adjust and/or limit the risk exposure of any CM as deemed necessary and appropriate at its sole discretion. Further, the Risk Department may perform routine due diligence or submit general / ad-hoc inquiries to CMs concerning their risk management practices and/or financial integrity to supplement the Risk Department’s CM risk analysis and counterparty risk assessment.The CCP has investigatory powers (through its Markets Regulation Department) and information gathering powers in relation to CMs.Hide noteRule 204 (Notification and Reporting Obligation), Rule 205 (Compliance), Rule 801 (Investigations), Rulebook; Paragraph 9.2 (Risk Monitoring, General Inquiry and Due Diligence), Clearing Procedures |
| 13. Use of third-parties to meet membership requirements | |
| 13.1 Can the CM meet any of the membership requirements by using a third-party? | Not addressed in the Rules. |
| 13.2 If so, please provide the specifics of who can serve as a third-party (including any approval right of the CCP). | N/A. |
| 13.3 Is the third party required to provide any guarantee or be subject to diligence by the CCP? | N/A. |
| 14. CM minimum rating requirements | |
| 14.1 Are CMs subject to a minimum rating requirement? | Every CM must satisfy the internal stringent credit criteria established by the CCP. However, details of such credit criteria are not stated in the Rules.Hide noteRule 201(h) (Minimum Qualifications and Responsibilities), Rulebook |
| 14.2 If so, what is it? | N/A. |
| 15. CM information requirements | |
| 15.1 What information (financial and non-financial) do CMs have to provide to the CCP routinely? | All CMs shall submit to the CCP:Annual submissions: (1) Annual audited financial statements including profit and loss account, balance sheet and auditor’s report and (2) a copy of the annual regulatory forms, returns and reports furnished to the MAS, within the same timelines as required by the MAS, but no later than 5 months after the close of the financial year.Monthly Capital Requirement Computations: A monthly computation of the CM’s base capital or net head office funds (as such terms are defined in the SF(FMR)R), in the format of Form 2 of SF(FMR)R – “Statement of Financial Resources, Total Risk Requirement and Aggregate Indebtedness”, within 14 calendar days after the month-end.Daily report of long and/or short positions: Where a CM carries long or short positions, it shall provide a daily report to include an accurate inventory of all such positions. Such daily reports shall be submitted to the CCP by such time and/or in such manner as may be prescribed by the CCP. Such daily report shall be in such form as the CCP may prescribe from time to time and shall include but not be limited to the account numbers and the number of positions in each month for a Commodity and, in the case of options, in each expiration month for a put or call option, in which any person owns or controls positions in a single Contract Month or delivery month of any Commodity that equals or exceeds the reporting level for such Commodity or option prescribed from time to time by the CCP. CMs shall identify the owner and any controlling parties for any account or ensure that such information is made available directly to the CCP within such time as the CCP may prescribe. Upon request of the CCP, CMs shall obtain the information required by Rule 604 of the Rulebook regarding the ownership and control of positions within any Omnibus Account and any sub-account of any Omnibus Account. Provided that if the Omnibus Account holder does not wish the identity of any subaccount holder to be disclosed to its carrying CM, the carrying CM shall ensure that the Omnibus Account holder submit such daily report directly to the CCP.Ad-hoc submissions: Any non-routine submission of financial reports, returns, statements and notifications furnished to a regulatory authority, as soon as provided to the regulatory authority.Any such other returns as may be required by the CCP, and by such times as prescribed by the CCP.Hide noteRule 202 (Financial Requirements and Financial Emergencies), Rule 604 (Positions, Offssets, and Open Interest), Rulebook; Paragraph 11.3 (Financial & Capital Reporting and Other Notification Requirements), Clearing Procedures |
| 16. Additional CM information requirements | |
| 16.1 What additional information (financial and non-financial) can the CCP require CMs to provide? | Financial Requirements or Financial EmergenciesA CM is required to notify the CCP (through its Market Regulation Department) immediately when it is unable to satisfy, or it will soon be unable to satisfy any financial requirement.A CM is required to notify the CCP (through its Market Regulation Department) and the Exchange immediately when it knows of the existence of a Financial Emergency or an impending Financial Emergency.General notification and reporting obligationsAll CMs shall, and shall require their auditors to, immediately report to the CCP: any adverse remark or report of its auditors on any matter which adversely affects or may adversely affect its financial position to a material extent;any comment from the auditor which in the auditor’s opinion constitutes or may constitute a contravention of MAS Requirements or the Rules, or an offence involving fraud, dishonesty, or financial impropriety;any irregularity that has or may have material effect upon the accounts, including any irregularity that may affect or jeopardise the monies or assets of any Customer of the CM.Any such remark, report, comment or irregularity in respect of a CM which is a bank shall only relate to such CM’s activities, operations and business as governed under the Rules.All CMs shall notify the CCP immediately of:any change or anticipated change in circumstances applicable to the CM, of which it is aware, which will, or are likely to, cause the CM to be unable to satisfy any one or more of the membership criteria applicable to it;any breach (or any non-frivolous or non-vexatious investigation or allegation of a breach) of any provision in applicable law involving fraud, dishonesty or financial impropriety by the CM or its substantial shareholders, officers, Representatives, employees, agents, contractors, or Customers, including full particulars of such breach;any enforcement actions, proceedings, sanctions, injunctions, or the like, against the CM, or any of its substantial shareholders, officers, Representatives, employees, agents, contractors or Customers by any self-regulatory organisation, regulator, or law enforcement agency whether in or outside Singapore (including without limitation any complaint or investigation involving an allegation of fraud, dishonesty or financial impropriety);any legal proceedings against the CM, or any of its substantial shareholders, officers, Representatives, employees, agents, contractors, or Customers whether in or outside Singapore involving an allegation of fraud, dishonesty or financial impropriety;any change in the CM’s name, address or similar event, and any change or amendment of its constitutive documents;any alteration in other business information which the CM may be required to furnish to the CCP;any changes or proposed changes regarding the CM’s Representatives, or any other persons as the CCP may specify from time to time;any other information required by the CCP from time to time, which requirement shall be communicated by means of a regulatory notice; andanything relating to the CM of which the CCP would reasonably expect notice.Change of nature of business, legal status or ControlEvery CM shall seek the CCP’s consent in relation to a proposed change in the nature of its business or its legal status or (2) any proposed change in legal or beneficial ownership of 20% or more of its equity or partnership capital or any other circumstance that to the directors’ or partners’ belief would or might have the effect of changing the Control of the CM.Termination or suspension of clearing arrangementsEvery CM must immediately notify, or where practicable, pre-notify, the CCP in writing in the event of the CM terminating or suspending a clearing arrangement with any of its Customer(s).Infringement of Rules, SFA or any other applicable law; financial or commercial difficultyAll CMs shall immediately notify the CCP of any infringement of the Rules, the SFA or any other applicable law (including any such infringement by the CM’s Representative or Customer) or of any financial or commercial difficulty on the part of themselves or any CM or person subject to the Rules. The CM must provide such notification immediately and, as soon as practicable thereafter, provide full particulars of the infringement or difficulty.Compliance programAny records relating to the compliance program of a CM (which includes internal controls for governance, active anti-money laundering/terrorist financing checks and sanctions monitoring, and other requirements to comply with the applicable laws and the Rules) must be retained and provided to the CCP upon request. This includes any audits (internal or external) and the determinations or products of such audits.From time to time, the Market Regulation Department may request for documentation of the customer due diligence that has been performed by the CM, and the CM shall provide such records without delay.Reduction of paid-up share capitalNo CM, except a CM which is a bank, shall reduce its paid-up ordinary share capital or paid-up irredeemable and non-cumulative preference share capital without the prior approval of the CCP. Where the CM is a bank, the CCP shall be notified of such reduction.Positions, Offsets, and Open InterestBy the deadline determined by the CCP each CM will report (i) positions including outstanding long and short positions in order for the CCP to determine the open interest of Customer Accounts and House Accounts in each Contract and (ii) reportable positions.The CCP shall be entitled to require reports from one or more CMs in relation to any Contract even if the number of positions owned or controlled is below the reporting level presently prescribed by the CCP.Omnibus AccountsAll CMs with Omnibus Accounts must maintain a complete list of all Omnibus Accounts and identify all sub-accounts within each Omnibus Account. Such list shall be promptly provided to the CCP upon request.Each Omnibus Account must at all times have a record of the gross long and short positions held within. Such records are to be made available to the CCP upon request.Segregated Customer AccountsCMs shall inform and keep the CCP informed of any and all information required to discharge its obligations under the SFA in relation to the segregation of its Customer’s moneys and assets, and make all records in relation to its segregated accounts accessible to the CCP upon request.Where a CM becomes aware of its failure or of any matter that may cause it to fail to maintain a segregated account to hold money or assets deposited by its Customers or use the money or assets therein solely for the benefit of its Customers, that CM must notify the CCP in writing immediately.Collateral accountsA CM is required to establish collateral accounts with at least 1 appointed settlement bank and with an appointed custodian for any non-cash collateral. The details for each such collateral account and any subsequent modifications to them shall be submitted to the CCP with at least ten (10) business days’ prior notice to allow for necessary updates to the Abaxx Clearing System (“ACS”).InvestigationsCMs shall cooperate fully with all investigations conducted by the Market Regulation Department (whether or not such CM is the direct subject of such investigation). Without limitation, each CM shall:promptly furnish to the Market Regulation Department such information and documentary material, or any other materials, as may reasonably be requested in writing (including details of the CM’s House and Customers’ accounts);answer any question asked by a duly authorised representative of the Market Regulation Department (including any Investigation Examiner) truthfully and fully, and make available for interview such of its employees (including the CM’s Representatives) as may reasonably be requested, and procure that such employees answer any question asked by or on behalf of the Market Regulation Department truthfully and fully;permit those persons appointed to carry out or assist in carrying out the investigation on reasonable notice, such notice being commensurate with the seriousness of the potential or alleged violation of the Rules, to enter any premises in any part of the world where the CM carries on its business or maintains its records during normal business hours for the purpose of carrying out such investigation;make available for inspection such documents, records or other material in its possession, power or control as may reasonably be required and, upon request, provide copies of the same; and/oruse its best endeavours to ensure that so far as possible its agents give similar cooperation.Failure by a CM to co-operate with an investigation by the Market Regulation Department, or failure by a CM to provide information requested on a timely basis and concealment or destruction of evidence are each, for the avoidance of doubt, a violation of the Rules.Pursuant to Rule 801 of the Rulebook, each CM also authorizes the CCP to request any clearing house, exchange or regulatory body or person, including other CMs, to furnish to the CCP such information and documents as the CCP may request in writing in connection with an investigation, and Rule 801 shall constitute written authorization to the aforementioned parties to furnish to the CCP such information and documents as the CCP may request in writing in connection with an investigation.System or Connectivity DisruptionIn the event of any disruption that may impact the CM’s connectivity to and / or obligations to / from the CCP, the CM shall notify the CCP immediately.CM Business Continuity EventIn the event that a CM experiences a business continuity event (e.g., disruption and/or event that triggers any business continuity plan or procedures), the CM shall immediately notify the CCP and provide in writing through email (a) date and time of such event, (b) nature of the event and impact to connectivity and/or ability to meet obligations to/from the CCP, (c) actions being taken to resolve such event and anticipated time required to resolve, and (d) any additional information deemed applicable and/or as may be required by the Exchange or the CCP.Hide noteRule 202 (Financial Requirements and Financial Emergencies), Rule 204 (Notification and Reporting Obligation), Rule 205 (Compliance), Rule 206 (Omnibus Accounts), Rule 604 (Positions, Offsets, and Open Interest), Rule 609 (Margin and Segregated Accounts), Rule 801 (Investigations); Paragraph 2.3 (System or Connectivity Disruption), Paragraph 3.3.1, Paragraph 9.2 (Risk Monitoring, General Inquiry and Due Diligence), Paragraph 11 (Clearing Reports and CM Reporting Requirements) and Paragraph 12.1 (CM Business Continuity Event), Clearing Procedures |
| 17. CCP rights to monitor CMs | |
| 17.1 What other rights does the CCP have to monitor the financial health of CMs and their compliance with the CM membership requirements (e.g., to visit a CM’s premises)? | None in addition to those specified in items 15 and 16. |
| 18. CCP rights to enforce CM requirements | |
| 18.1 Is the CCP entitled to take any steps if a CM does not comply with the CM membership requirements, is downgraded or is subject to a material change regarding its status or financial health? | Yes.Where a CM is unable, or will soon be unable to satisfy any of the applicable financial requirements under the Rules, the CCP may direct the CM to conduct its activities on the CCP in such manner as it thinks necessary or desirable. The CM shall comply with all such directions. Failure to do so will be grounds for immediate termination of the CM’s membership.In the event of a Financial Emergency or an impending Financial Emergency, the CCP, or any committee thereof, may:make an additional Margin call or order any CM to deposit additional funds;impose such additional financial requirements or operational restrictions on any CM as the Exchange or the CCP thinks necessary or desirable;prohibit any CM from engaging in conduct that the CCP determines in its sole discretion to have caused or contributed to the Financial Emergency or that would prolong or impede the resolution of the Financial Emergency;suspend or terminate the membership of any CM, impose fines of such quantum as the CCP thinks fit, or impose such other sanction or penalty as the Exchange or the CCP thinks fit;prohibit any CM from seeking withdrawal of the excess Margins or Collaterals that are deposited with the CCP, which are not being utilized towards any positions; ortake any action as the CCP thinks necessary or desirable to resolve the financial Emergency.Also, the CCP may suspend or terminate the membership of any CM at its sole discretion. In particular, the CCP may suspend in whole or in part a CM privileges for up to a period of 1 year upon the occurrence of certain specified events, including:any declaration of default in respect of the CM;a CM fails to satisfy the CCP that it meets any material obligations required under the Rules or by the CCP, including financial requirements, contribution to the Guaranty Fund, licensing or risk management or other material obligations;it is necessary or desirable, in the CCP’s opinion, to protect the financial integrity, reputation or interest of the CCP.The CCP or the Business Conduct Committee (as the case may be) shall, at its absolute discretion, take any action or measure, or impose any terms or conditions, in relation to the suspension.The CCP may terminate the membership of a CM upon the occurrence of the CM becoming insolvent or calling a meeting of its creditors, or entering into an arrangement or composition under insolvency laws or suffers winding up, dissolution, or other similar event. Further:In the event the CCP suspends or terminates a CM’s privileges, the CCP may direct the affected CM to take such steps that the CCP deems fit for the protection of the Customers or the maintenance of a fair, orderly and transparent market and a safe and efficient CCP. The affected CM shall cooperate fully with the CCP with respect to such directions.In the event of a suspension, the CCP may utilize the suspended CM’s contribution to the Guaranty Fund for any purpose it thinks fit, including without limitation to satisfy the CM’s obligations to its Customers or the CCP, for as long as the CM has any positions.In the event that a CM (i) does not discharge its obligations to the CCP or (ii) becomes subject to any liquidation, insolvency, bankruptcy, reorganization, arrangement, moratorium, or similar proceeding, the CCP may in its absolute discretion declare that CM to be in default.See also item 100.Hide noteRule 202 (Financial Requirements and Financial Emergencies), Rule 210 (Suspension and Termination), Rule 211 (Effect of Suspension or Termination), Rulebook |
| 19. Cross guarantees and cross default in respect of CMs | |
| 19.1 If affiliated companies are CMs of the CCP, are cross-guarantees required? | No such requirement is specified in the Rules. |
| 19.2 Are there cross-default provisions relating to the default of an affiliate? | No. |
| 20. Parent guarantees for CMs | |
| 20.1 Are parent guarantees mandated for CMs in specific circumstances? | No. |
| 20.2 If so, what are the circumstances? | N/A. |
| 21. CM market data obligations | |
| 21.1 What types of market data are CMs required to provide to the CCP? | No such requirement is specified in the Rules. |
| 21.2 Is the CM’s obligation to provide market data mandatory or optional? | N/A. |
| 21.3 Can the obligation to submit market data (and to take on any penalty trades in connection with such submission) be outsourced to an affiliate of the CM or a third-party? | N/A. |
| 21.4 What does the CCP use the market data for? | N/A. |
| 21.5 What restrictions are imposed on a CM’s ability to disclose market data received from the CCP? | N/A. |
| 21.6 Are there penalties for failure to provide such market data or for providing insufficient or off-market data? | N/A. |
| 21.7 What rights and obligations does the CCP have regarding disclosure of market data received from CMs? | N/A. |
| 22. CCP rights to disclosure | |
| 22.1 What rights and obligations does the CCP have regarding disclosure of other information in relation to a CM, an affiliate of a CM or a Client received from CMs? | The CCP shall own all rights, title, interest, database rights, and trade secret rights in and to all data and related information submitted to the CCP, and which is not collected or received for the purpose of fulfilling regulatory obligations. The CCP has the exclusive right to use, distribute, sub-license, disclose and sell anonymized trade data and derivative works in any manner, media and jurisdiction.Also, the powers of the CCP following the completion of the CCP’s investigation and information gathering includes referring the matter to the Exchange or regulatory authorities for further enquiry where the CCP considers it necessary to investigate further, and handing over any documents, information or findings acquired during the course of its investigation or otherwise.Subject to the MAS Requirements, in exercising its enforcement powers and performing its functions, the CCP may co-operate with the Exchange, the MAS and other regulatory authorities in such manner as it deems fit and necessary, and disclose to any of the foregoing persons any information or documents regarding a CM and its affairs and/or of its officers, Representatives, employees, contractors, agents or Customers. For the avoidance of doubt and notwithstanding anything to the contrary, no such act or disclosure by the CCP shall constitute a breach of any confidentiality provisions in the Rules.However, the CCP (including its Board, committees, officers and other employees) is subject to certain confidentiality provisions in the Rules:CCP officers and other employees, agents and independent contracts are prohibited from disclosing Material Non-Public Information obtained as a result of their employment, agency relationship or engagement with the CCP where the officer or other employee, agent or independent contractor expected or should have reasonably expected that the information disclosed may assist a person in trading any Exchange Contract, any related Contract traded on another facility or other market, or any related underlying Commodity.No Board member, committee member, member of a BCC panel or Appellate panel or CCP officer or other employee may use or reveal any Confidential Information unless in accordance with Section 64 of the SFA.No person shall serve on the Hearing Panel unless he or she has agreed in writing that he or she will not publish, divulge, or make known in any manner, any facts or information regarding the business of any person or any other information which may come to his or her attention in his or her official capacity as a Member of the Hearing Panel, except when reporting to the Board or to a committee concerned with such information or to the Market Regulation Department, when requested by the MAS or other regulatory authority or when compelled to testify in any judicial or administrative proceeding.All information provided by any party (including the Exchange or the CCP) in the course of a hearing are to be treated as non-public, confidential, and not disclosable by any party (except as required by law). Prior to the conduct of any such hearing, every person sitting on the Hearing Panel must agree in writing to the non-disclosure of any information that comes to their attention in their official capacity as a member of the Hearing Panel.All information provided by any party (including the CCP) in the course of a disciplinary proceeding is to be treated as non-public, confidential, and not disclosable by any party (except as required by law).For completeness, we also understand that the CCP is a party to The International Information Sharing Memorandum of Understanding and Agreement (the “MOU”), which permits parties to the MOU to request for information from the CCP (and vice versa), and such information may extend to information relating to the CCP’s CMs (including a CM’s and its customers’ trading activity, funds and collateral on deposit, cash flow, financial condition, margin and open positions) for regulatory purposes. The CCP is only required to use reasonable efforts to provide information, but the CCP is not obliged under the MOU to provide the requesting party with any information. Any information provided will also be kept confidential by the recipient party.Hide noteRule 311 (Confidential Information), Rule 503 (Data Submitted to the Clearing House), Rule 800 (General), Rule 802 (Business Conduct Committee), Rule 803 (Disciplinary Proceedings), Rulebook |
| 23. CM indemnities | |
| 23.1 Do CMs (or their affiliates) provide an indemnity in favour of the CCP or any other party (including for any direct or indirect loss as a result of a default of another CM other than default fund contributions or assessments)? | Yes.Hide noteRule 214 (Limitation of Liability), Rule 609 (Margin and Segregated Accounts), Rule 612 (Default of Clearing Members), Rulebook |
| 23.2 If so, what is the scope of such indemnity? | General indemnityEach CM agrees to indemnify the CCP and the CCP’s representatives (“Indemnified Persons”) against any losses, liabilities, judgments, suits, actions, proceedings, claims, damages, costs and expenses (including reasonable attorney’s fees) (“Losses”) incurred or suffered by the Indemnified Persons where such Losses arose out of or in connection with:any breach by the CM of its obligations under the Rules; orany wilful, unlawful, unlawful, reckless or negligent act or omission by the CM,other than through the negligence of the CCP.In the event that any legal, arbitration or other proceedings are brought to impose any liability on the Indemnified Persons for an alleged failure on the part of any Indemnified Person to prevent or to require action by a Member or any of its Representatives, the CM shall reimburse the CCP for all expenses, legal fees or payments made in connection with any settlement of proceedings or as a result of any order, award or judgment made in such proceedings.MarginEach CM shall be liable to the CCP for any cost or liability incurred by the CCP as a result of the CCP possessing, holding, perfecting the title to or otherwise being associated with, any asset provided to it by that CM by way of Margin.Assessment ContributionsWhen the Losses related to a Defaulter exceed or are likely to exceed funded resources of the Default Waterfall, the CCP may exercise the following powers of assessment and require CMs to contribute additional resources as described within the Default Waterfall (“Assessment Contribution”).Immediately upon the CCP determining the Assessment Amount in a regulatory notice, all CMs (other than the Defaulter(s)) shall indemnify the CCP and become liable to pay Assessment Contributions to the CCP.Indemnification by Defaulting CMWithout prejudice to the generality of the Rules, the CCP shall not be liable to any CM or any third party in respect of any loss, damage, costs, charges and/or expenses and/or liability of whatsoever nature and howsoever arising suffered or incurred by such CM or third party, arising out of or in connection with the declaration or non-declaration of a default by the CCP.The Defaulter, acting for its own account as principal, shall indemnify, hold harmless and be liable to the CCP in respect of all the loss, damage, costs, charges and/or expenses and/or liability of whatsoever nature suffered or incurred (including legal costs on a full indemnity basis) by the CCP arising out of the Defaulter’s conduct (whether such conduct took place prior to or after declaration of the Default) or in connection with the default.Hide noteRule 214 (Limitation of Liability), Rule 609 (Margin and Segregated Accounts), Rule 612 (Default of Clearing Members), Rulebook |
| 24. Product coverage of the Service | |
| 24.1 Does the Service cover all products cleared through the legal entity or are other products cleared through other services in the same legal entity? | Yes.Hide noteRule 200 (General), Rulebook |
| 25. Non-default losses | |
| 25.1 Does the CCP have the right to pass on to CMs non-CM-default losses? | There are no provisions in the Rules specifying that any losses of the CCP may be passed on to CMs other than in the event of a CM default (via default fund contributions and the loss allocation mechanism) or pursuant to the indemnities given by the CMs.Hide noteRule 214 (Limitation of Liability), Rule 609 (Margin and Segregated Accounts), Rule 612 (Default of Clearing Members), Rulebook |
| 25.2 If so, please describe how such losses are allocated and when an amount so allocated to a CM must be paid to the CCP. | N/A. |
| 26. CM’s liability for non-default losses | |
| 26.1 Is there a cap on a CM’s liability for non-CM-default losses? | Not addressed in the Rules. |
| 26.2 If so, please describe the cap. | N/A. |
| 27. Governing committees without CM representation | |
| 27.1 Are there governing committees on which CMs are not represented overseeing the management of the CCP? | Yes.Hide noteRule 307 (Powers of Committees or Officers), Rule 401 (General), Rulebook |
| 27.2 If so, what are they? | Board level committeesBoard level committees are to establish plans for the strategic direction of the CCP, develop regulatory policy, advise and assist the Board, and perform the specific duties assigned to them. The Board may refer to a committee any matter within the committee’s jurisdiction. It is the duty of all Board level committees to meet, consider any matter before it, and make a complete report to the full Board. The Board shall not be bound by the contents contained within the report(s), and when considering the recommendations contained within the report(s) submitted by Board level committees, the Board may in its discretion adopt or disregard, whether wholly or in part, all of the recommendations presented in the report(s).Board level committees of the CCP include:Risk Committee: The Risk Committee, a Board level committee, oversees the risk program and reviews and approves all new applications for membership. The Risk Committee may adopt additional criteria regarding qualifications for admission to membership in the CCP which, when approved by the Board, shall be incorporated into the Rules.Regulatory Oversight Committee: The Regulatory Oversight Committee, a Board level committee, oversees the compliance and market regulation programs. The Regulatory Oversight Committee may adopt such additional compliance and/or market regulation requirements which, when approved by the Board, shall be incorporated into the Rules.Non-Board level committeesNon-Board level committees are to perform the specific duties assigned to them. The Board may refer to a committee any matter within the non-Board level committee’s jurisdiction. It is the duty of all non-Board level committees to meet, consider any matter before it, and make a complete report to the full Board. The chairman of the non-Board level committee may appoint to all non-Board level committees Members and non-members.Business Conduct CommitteeThe Business Conduct Committee (“BCC”) has the authority to oversee and conduct hearings on alleged Rule violations for the purpose of determining if there is cause to bring disciplinary proceedings against any CM or any person subject to the Rules.The BCC acts through a Hearing Panel appointed by the BCC chairman, which must be comprised of at least the BCC chairman or his designee from the BCC, two Member Representatives who have formally been appointed to the BCC and two independent non-Members, who are not Representatives or Members, to ensure the fairness of hearings.Hide noteRule 401 (General), Rule 402 (Board Level Committees), Rule 403 (Risk Committee), Rule 404 (Regulatory Oversight Committee), Rule 405 (Non-Board Level Committees), Rule 802 (Business Conduct Committee), Rulebook |
| 28. Risk committee | |
| 28.1 Are CMs represented on a risk committee? | The Risk Committee is a Board level committee established by the Board.Also, the CCP will establish a Risk Advisory Panel for the purpose of communicating the performance of and seeking feedback on the risk framework of the CCP including any proposed material enhancements, which shall convene at least 4 times per year. The composition of the Risk Advisory Panel will be determined by the CCP. The CCP has informed us that CMs will be represented on the panel.Hide noteRule 305 (Board), Rule 403 (Risk Committee), Rulebook; Paragraph 9.3 (Risk Governance), Clearing Procedures |
| 28.2 What is the composition of the risk committee? | Not addressed in the Rules. |
| 28.3 What is the role of the risk committee? | The Risk Committee oversees the risk program of the CCP and reviews and approves all new applications for membership.The Risk Advisory Panel is established for the purpose of communicating the performance of and seeking feedback on the risk framework of the CCP including any proposed material enhancements.Hide noteRule 403 (Risk Committee), Rulebook; Paragraph 9.3 (Risk Governance), Clearing Procedures |
| 28.4 By what voting threshold does the risk committee make decisions (e.g., a majority ballot of committee members)? | Not addressed in the Rules. We understand from the CCP that the terms of reference of the Risk Committee provide for decisions to be made by majority vote. |
| 28.5 Is the CCP required by the Rules to implement the decisions/recommendation of a risk committee? | No. The Board is not bound by the contents contained within any reports prepared by Board level committees (including the Risk Committee) on matters within the committees’ jurisdiction, and the Board may, when considering the recommendations contained within such reports, in its discretion adopt or disregard (whether wholly or in part) all of the recommendations presented in the reports.Hide noteRule 402 (Board Level Committees), Rulebook |
| 28.6 If not, do the Rules require the CCP to report the decision/recommendation of the risk committee to regulators and to provide an explanation to the member committees with respect to why the CCP did not implement a decision/recommendation? | Not addressed in the Rules. |
| 28.7 How often does the risk committee convene during the year? Quarterly, bi-annually, annually? | Not addressed in the Rules. We understand from the CCP that the Risk Committee convenes quarterly pursuant to its terms of reference.The Risk Advisory Panel shall convene at least 4 times per year.Hide noteParagraph 9.3 (Risk Governance), Clearing Procedures |
| 29. Default committee | |
| 29.1 Are CMs represented on a default committee? | Yes, CMs are represented on the Default Management Panel. Hide noteParagraph 1.2.3, Default Management Playbook |
| 29.2 What is the composition of the default committee? | The Default Management Panel comprises of elected CMs’ representatives, liquidation brokers, industry experts and a representative from each control function of the CCP including, but not limited to, (a) exchange operations, (b) clearing operations, (c) risk management, (d) market regulation and (e) technology.We understand from the CCP that it will appoint CMs as liquidation brokers and these CMs will be part of the Default Management Panel.Hide noteParagraph 1.2.3, Default Management Playbook |
| 29.3 What is the role of the default committee? | The Default Management Panel is an advisory panel that may be convened from time to time to provide advice on matters concerning default management. The Default Management Panel is also convened for any default management exercise.Hide noteParagraph 1.2.3, Default Management Playbook |
| 29.4 By what voting threshold does the default committee make decisions (e.g., a majority ballot of committee members)? | Not addressed in the Rules. |
| 29.5 Is the CCP required by the Rules to implement the decisions/recommendation of the default committee? | Not addressed in the Rules. |
| 29.6 If not, do the Rules require the CCP to report the decision/recommendation of the default committee to regulators and to provide an explanation to the member committees with respect to why the CCP did not implement a decision/recommendation? | No. |
| 29.7 How often does the default committee convene during the year? Quarterly, bi-annually, annually? | There is no prescribed frequency in the Rules. However, the Default Management Panel will be convened for any default management exercise, which is performed on an annual basis (or more frequently if market conditions warrant). Hide noteParagraphs 1.2.3 and 2.3, Default Management Playbook |
| 29.8 Are CM employees required to serve on any default committees or in any other capacity in connection with the management of the unwind of a defaulting CM? | Not addressed in the Rules. Representatives of elected CMs and CMs who have been appointed as liquidation brokers will be part of the Default Management Panel: see item 29.2. |
| 29.9 If so, how are they chosen? | Not addressed in the Rules. |
| 29.10 What are the consequences if a CM refuses to serve on a default committee? | Not addressed in the Rules. |
| 29.11 Can a CM representative on the default committee still act for the CM or will there be a delay before such CM representative can return to act for CM? | Not addressed in the Rules. |
| 29.12 What legal documentation, if any, must a CM or CM representative enter into in connection with participating on any default committee? | Not addressed in the Rules. |
| 29.13 What obligations does a CM or CM representative incur by entering into any such documentation or by serving on such committee (including in relation to confidentiality and material non-public information)? | Not addressed in the Rules. |
| 30. Other committees | |
| 30.1 Are there any other committees on which CMs are represented? | No. |
| 30.2 If so, please provide equivalent responses for such committee(s) to those in items 28.2–28.7. | N/A. |
| 31. Transaction submission and Contract registration | |
| 31.1 Please describe how a Transaction is submitted and registered as a Contract (including timing, criteria for accepting Contracts for clearing, the resubmission of Transactions, and any differences for bunched orders (i.e. whether pre-allocated or unallocated)). | Submission of tradesThe CCP accepts trades from the Exchange on a real-time basis. Trades that are successfully received by the Abaxx Clearing System (“ACS”) from the Abaxx Exchange System (“AES”) are aggregated into positions and allocated to the respective position accounts of a CM during the Trading Day.Positions allocated to a Net Position Account will be netted where they are the same contract to form a single position for the position account.Position allocated to a Gross Position Account (i.e., omnibus account) will not be netted and shall be presented as gross positions.All trades submitted to the CCP by the Exchange or by CMs must be allocated to a designated account of a CM. No trades will be accepted by the CCP without a Clearing Member ID and an account ID. Trades entered into accounts not recognized by the CM will be allocated to the account owned by the CM as per the Clearing Member ID indicated on the order or the EFRP submitted to the Exchange (i.e. the Default Account).CM accessA CM will access the ACS through the graphical user interface provided by the CCP through connectivity provided by an independent software vendor or through a CM internally developed system. A CM must ensure adherence to the conformance criteria and any technical requirements established and communicated by the CCP that may be revised from time to time. A CM will use such Application Programming Interface and relevant messaging protocol accepted by the CCP to communicate with the ACS. The operation systems (e.g. back-office system(s)) of the CM must be able to connect to the ACS during the time periods specified by the CCP.The ACS allows CMs to directly manage their positions and the positions of their Customers where the positions belong to and/or on behalf of a single beneficial owner. Such position management actions must be initiated and confirmed (as applicable) within the established cut -off times in order to be completed within the Trading Day. These position management actions comprises:Trade Transfer/Allocation: Transfer or allocate a current day trade(s) to another position account of a CM.Give-up Trade: Transfer and acceptance of a current day trade(s) to another CM.Position Transfer: Transfer of position(s) from a position account of a CM to a position account of another CM or from a position account to another position account of the same CM.Position Close-out: Offset of long/short position(s) of an identical contract within an omnibus account (i.e., a Customer Omnibus Position Account or a CM Default Position Account) provided that they belong to the same beneficial owner.Hide noteRule 601 (Trading Data), Rulebook; Paragraph 2.4 (Trade Acceptance), Paragraph 4.1 (Position Aggregation), Paragraph 4.2 (Position Management), Clearing Procedures |
| 32. Method by which the CCP assumes contractual relationship | |
| 32.1 How is the credit of the CCP substituted for the credit of the trading counterparty (e.g., novation, guarantee, or other)? | By novation.Hide noteRule 603 (Substitution), Rulebook |
| 32.2 If by novation, is the concept of novation recognised under relevant law? | Yes. Singapore law recognizes novation.Hide noteCommon law |
| 32.3 How does novation or the guarantee occur (trade by trade, batch, etc.)? | For trades matched through the central limit order book on Exchange facilities, the CCP shall be substituted through the process of novation as the seller to the buyer and the buyer to the seller of the relevant number of positions upon the successful matching of trade data.For EFRPs and Block Trades, the CCP shall be substituted through the process of novation as the seller to the buyer and buyer to the seller of the relevant number of positions upon the successful entry of the trade into the CCP’s systems.At such time, the respective Contracts shall be deemed to have been bought or sold to the CCP, and the CCP shall have all rights and liabilities in relation to performance of the financial obligations thereunder. No other person has any rights under any position between the CM and the CCP.Hide noteRule 603 (Substitution), Rulebook |
| 33. CCP discretion to reject Transactions | |
| 33.1 Does the CCP have discretion to reject Transactions submitted for clearing? | No. Trade details will be transmitted from the AES to the ACS on a real-time basis once they are executed and matched by or registered in the AES.However, all trades submitted to the CCP by the Exchange or by CMs must be allocated to a designated account of a CM. No trades will be accepted by the CCP without a Clearing Member ID and an account ID. Trades entered into accounts not recognized by the CM will be allocated to the account owned by the CM as per the Clearing Member ID indicated on the order or the EFRP submitted to the Exchange (i.e. the Default Account).Hide noteRule 601 (Trading Data), Rulebook; Paragraph 2.4 (Trade Acceptance), Clearing Procedures |
| 33.2 If so, under what circumstances? | N/A. |
| 34. CCP obligations following failure to register a Transaction | |
| 34.1 If the CCP fails to register a Transaction, is the CCP under an obligation to notify the relevant CM? | Not applicable. |
| 35. CCP rights against CMs for incorrectly registered Contracts | |
| 35.1 What rights can the CCP exercise against CMs in respect of incorrectly registered Contracts? | No CM shall place any false or inaccurate entries on any clearing communication or records. Any CM that does so will be considered to be in per se violation of the Rules and the Chief Regulatory Officer may issue summary fines of up to S$5,000 against any such CM. Any CM against which the Chief Regulatory Officer has issued a summary fine has 15 calendar days from the receipt of notice of the summary fine to file a written appeal with the Market Regulation Department, which should be accompanied by the grounds of the appeal and supporting evidence thereof. The appeal shall be heard by the BCC and the decision of the BCC shall be final.In addition, the CCP has the powers to suspend or terminate the membership of any CM at its sole discretion, and investigatory and disciplinary powers against any CM, for a violation of the Rules.Hide noteRule 210 (Suspension and Termination), Rule 602 (Reliance on Data), Rule 801 (Investigations), Rule 804 (Sanctions), Rulebook |
| 36. CCP discretion to avoid Contracts | |
| 36.1 Does the CCP have the discretion to avoid Contracts if it considers such Contracts to be void, voidable, unenforceable or otherwise incorrectly registered (as a result of fraud, illegality, market abuse or otherwise)? | Not addressed in the Rules. |
| 36.2 If a Contract is avoided, are CMs required (either by CCP rules or due to local law in the jurisdiction of the CCP) to enter into replacement Contracts? | N/A. |
| 36.3 If Contracts are avoided, can the CCP enter into replacement Contracts on its own account with all costs and losses in establishing such Contracts to be borne by the relevant CM? | N/A. |
| 37. Assumption of liability for Transactions/Contracts | |
| 37.1 How are liabilities for Transactions/Contracts allocated during a trade lifecycle (i.e., prior to and post the CCP accepting Transactions, with respect to a CM and another CM and/or to the CCP)? | For trades matched through the central limit order book on Exchange facilities, the CCP shall be substituted through the process of novation as the seller to the buyer and the buyer to the seller of the relevant number of positions upon the successful matching of trade data.For EFRPs and Block Trades, the CCP shall be substituted through the process of novation as the seller to the buyer and buyer to the seller of the relevant number of positions upon the successful entry of the trade into the CCP’s systems.At such time, the respective Contracts shall be deemed to have been bought or sold to the CCP, and the CCP shall have all rights and liabilities in relation to performance of the financial obligations thereunder. No other person has any rights under any position between the CM and the CCP.Hide noteRule 603 (Substitution), Rulebook |
| 38. Delayed allocation of Transactions | |
| 38.1 Do the Rules contemplate the possibility that certain Transactions, e.g., bunched orders, may not be immediately allocated to the relevant end Clients? | No. |
| 38.2 If so, how are such Transactions and the related collateral handled in the event of a CM default prior to allocation (including changes in value of the collateral)? | N/A. |
| 39. Trading limits | |
| 39.1 Can the CCP impose trading limits in respect of house business? | Yes.Hide noteRule 504 (Position Limits and Exemptions), Rule 804 (Sanctions), Rulebook |
| 39.2 If so, what types of limits may be imposed? | Except as provided in Rule 504 of the Rulebook and as provided in the Exchange rules, every CM must adhere to the position limits and co-operate with the Exchange and CCP to procure the compliance of each of their Customers with the position limits.The Hearing Panel has the power to impose certain sanctions on any Respondent where the Hearing Panel is satisfied that the Market Regulation Department has proved on a balance of probabilities that the Respondent has committed the conduct described in the relevant charge, including:restricting, suspending or terminating the Respondent’s (or the relevant CM’s) access to the market or to supervise the entry of any orders into such platforms by others;restricting the Respondent’s (or the relevant CM’s) ability to trade, place, enter, accept or solicit orders in any or all products of the Exchange, or its ability to conduct the clearing related functions such as opening account, request for deposit/withdrawal of deposits or extraction of reports/data in the CCP; orthe prescribing of limitations on positions of the Respondent (or the relevant CM) as may be appropriate, including issuing an order or notification to relevant CMs indicating that they should not accept new positions on behalf of any such party.Hide noteRule 504 (Position Limits and Exemptions), Rule 804 (Sanctions), Rulebook |
| 39.3 What is the governance process for imposing and/or changing those limits? | The Board or the Chief Regulatory Officer may agree with a CM or a concerned person to waive or vary particular requirements of the Rules in such circumstances and subject to such conditions as the CCP thinks fit providing that the Board or the Chief Regulatory Officer are satisfied that compliance with the relevant requirements would be unduly burdensome to the CM or person concerned or that compliance with the relevant requirement would not be in the interests of the CCP, and waiver or variation of the requirements does not disadvantage other CMs or create unacceptable risks for the CCP. Waivers or variations of requirements may be publicised at the discretion of the CCP.The governance process for the imposition or changing of trading limits is set out in the Exchange rules.Hide noteRule 303 (Waiver of Rules or Parts of Rules), Rulebook |
| 39.4 How are such limits communicated to the CM? | All position limits are set forth in the Position Limit, Position Accountability and Reportable Level Table, accessible at www.abaxx.exchange.Hide noteRule 504 (Position Limits and Exemptions), Rulebook |
| 39.5 Is there a notice period before new limits become effective? | Not addressed in the Rules. |
| 39.6 Is there a shorter (or zero) notice period in special or emergency circumstances, and what are the notice period and circumstances? | N/A. |
| 40. Limitations on the ability of a CM to enter into a new Contract | |
| 40.1 Is there any other reason why the CCP can limit the ability of a CM to enter into a new Contract? | Financial EmergenciesIn the event of a Financial Emergency or an impending Financial Emergency, the CCP, or any committee thereof, has broad powers to take any action, including (1) imposing operational restrictions on any CM (2) prohibit any CM from engaging in conduct that the CCP determines in its sole discretion to have caused or contributed to the Financial Emergency or that would prolong or impede the resolution of the Financial Emergency or (3) suspending or terminating the membership of any CM.Notification and reporting obligationsAll CMs are required to (1) notify and report to the CCP the occurrence of certain specified events, and (2) obtain the CCP’s consent to a proposed change in the nature of the CM’s business or legal status or any proposed change in Control of the CM. The CCP may suspend a CM’s access to the CCP and to clear Contracts if the CM fails to comply with such notification and approval requirements.Suspension or terminationThe CCP may suspend or terminate the membership of any CM at its sole discretion. Additionally, the CCP may suspend in whole or in part a CM privileges for up to a period of 1 year upon the occurrence of any of the following events:any declaration of default in respect of the CM;a CM or any of its Representatives or Customers fails duly to perform or is, in the opinion of the CCP, in breach of any provision of the Rules or regulatory notices or of any agreement, understanding or arrangement which the CM has from time to time with the CCP;any violation of any applicable laws by the CM or any of its Representatives or Customers;a CM fails to pay any fees, levies or charges due to the CCP;the application for membership contains material errors or omissions or is determined to be misleading in a material aspect;a CM fails to satisfy the CCP that it meets any material obligations required under the Rules or by the CCP, including financial requirements, contribution to the Guaranty Fund, licensing or risk management or other material obligations;cessation, suspension or termination of its membership with any other exchange or other clearing facility or its regulatory license(s);non-satisfaction of any judgment or court order of any court;the CM or any of its Representatives is convicted of any offence including fraud, dishonesty, or financial impropriety;any disciplinary proceedings under the Rules are pending; orit is necessary or desirable, in the CCP’s opinion, to protect the financial integrity, reputation, or interest of the CCP.The CCP may terminate the membership of a CM upon the occurrence of the CM becoming insolvent or calling a meeting of its creditors, or entering into an arrangement or composition under insolvency laws or suffers winding up, dissolution, or other similar event.Board’s powers in emergenciesIn the event that the CCP determines that an emergency situation (including, but not limited to, any declaration of a Force Majeure Event) exists in which the fair and orderly market in a Commodity is likely to be disrupted, or the financial integrity of the CCP is threatened, or the normal functioning of the CCP has been or is likely to be disrupted, the Board may take such action as may in the Board’s sole discretion appear necessary to prevent, correct or alleviate the emergency condition (including referring it to an Emergency Panel).In the event that the CCP identifies or suspects the development or possible development of a situation or practice likely to disrupt the market, the Board may refer the matter to a Emergency Panel. The Emergency Panel may, inter alia:suspend, curtail, or terminate trading in any or all Contracts;limit trading to liquidation of Contracts only; orconfine trading to a specific price range.Hide noteRule 202 (Financial Requirements and Financial Emergencies), Rule 204 (Notification and Reporting Obligation), Rule 210 (Suspension and Termination), Rule 306 (Board’s Powers in Emergencies), Rulebook |
| 41. Consequences of breach of trading limits | |
| 41.1 How are existing Contracts treated if any trading limits are breached? | In the event of a Financial Emergency (which may include a breach of trading limits) or an impending Financial Emergency, the CCP, or any committee thereof, may:make an additional Margin call or order any CM to deposit additional funds;impose such additional financial requirements or operational restrictions on any Member as the Exchange or the CCP thinks necessary or desirable;prohibit any CM from engaging in conduct that the CCP determines in its sole discretion to have caused or contributed to the Financial Emergency or that would prolong or impede the resolution of the Financial Emergency;suspend or terminate the membership of any CM, impose fines of such quantum as the CCP thinks fit, or impose such other sanction or penalty as the Exchange or the CCP thinks fit;prohibit any CM from seeking withdrawal of the excess Margins or Collaterals that are deposited with the CCP, which are not being utilized towards any positions; ortake any action as the CCP thinks necessary or desirable to resolve the Financial Emergency.The CCP may suspend in whole or in part a CM privileges for up to a period of 1 year upon the occurrence of, inter alia, a CM is in breach of any provision of the Rules (including a breach of the trading limits).The Hearing Panel has the power to impose certain sanctions on any Respondent where the Hearing Panel is satisfied that the Market Regulation Department has proved on a balance of probabilities that the Respondent has committed the conduct described in the relevant charge (including a breach of the trading limits), including the following:order the Respondent to cease and desist from the conduct found to be in violation of the Rules or the SFA or any applicable law or from conduct which would violate the Rules or the SFA or any applicable law;order the Respondent (or the relevant CM) to liquidate such portion of the positions in the Respondent’s (or the relevant CM’s) House or Customers’ Accounts, or both, as the Hearing Panel deems appropriate to ensure the integrity of Contracts or to ensure an orderly and liquid market;order the Respondent (or the relevant CM) to deposit such Margin with the CCP as the Hearing Panel deems appropriate to protect the integrity of positions or otherwise;prescribe such additional capital or other financial requirements as it deems appropriate;restrict, suspend or terminate the Respondent’s (or the relevant CM’s) access to the market or to supervise the entry of any orders into such platforms by others;restrict the Respondent’s (or the relevant CM’s) ability to trade, place, enter, accept or solicit orders in any or all products of the Exchange, or its ability to conduct the clearing related functions such as opening account, request for deposit/withdrawal of deposits or extraction of reports/data in the CCP;suspend any or all of the relevant CM’s privileges of membership;suspend or terminate the relevant CM; orprescribe limitations on positions of the Respondent (or the relevant Member) as may be appropriate, including issuing an order or notification to relevant Members indicating that they should not accept new positions on behalf of any such party.Rule 518 of the Exchange rules also contains provisions which address position limit violations. If a Member fails to liquidate Contracts within the time prescribed by the Exchange, the Exchange may take such steps as it may deem necessary or appropriate to liquidate such Contracts on behalf and at the expense of such Member to the extent necessary to eliminate the excess.Hide noteRule 202 (Financial Requirements and Financial Emergencies), Rule 210 (Suspension and Termination), Rule 804 (Sanctions), Rulebook |
| 41.2 How are new Transactions treated if any trading limits are breached? | See item 41.1 for details of the actions that the CCP may take against a CM who has breached the trading limits. |
| 42. Physical deliveries | |
| 42.1 If the CCP can match CMs for delivery and receipt of underlying assets, under what circumstances can it do so? | The CCP will match buyers and sellers, if the method of settlement specified in a particular Contract is physical settlement.Hide noteRule 603 (Substitution), Rulebook |
| 42.2 Are the legal obligations for delivery expressed in the rules, procedures or any related agreement? | Yes. The legal obligations of the CM and the CCP in relation to physically delivered contracts are set out in Chapter 7 of the Rulebook and, where applicable, the chapter in the rulebook of the Exchange which includes the contract specifications for the commodities being delivered and such other requirements as the CCP and/or Exchange may prescribe from time to time.Hide noteChapter 7 (Delivery), Rulebook |
| 43. Compression services | |
| 43.1 Does the CCP offer compression services? | Not applicable – the CCP does not clear OTC derivatives. |
| 43.2 If so, describe the services provided and the requirements or restrictions set out in the Rules. | Not applicable – the CCP does not clear OTC derivatives. |
| 44. Types of margin | |
| 44.1 What types of margin (e.g., initial margin, payment margin, variation margin) does the CCP require? | The Margin requirement of a CM in relation to Contracts will be the composite of the following:Initial marginVariation marginDelivery marginAdditional marginNothing in the Rules shall preclude the CCP from imposing any other Margin requirement that is necessary or desirable, in the CCP’s opinion, to protect the financial integrity, reputation, or interest of the CCP.Hide noteRule 609 (Margin and Segregated Accounts), Rulebook |
| 44.2 For each type of margin, provide a brief description of the risks the margin covers. | Initial marginThe CCP will determine the initial margin for a position account based on a risk-based margin methodology at the intraday clearing cycle and the end-of-day clearing cycle (i.e. at least twice daily).The risk model is calibrated to meet established performance standards and will be informed by the following margin parameters:Price Scanning RangeIntra-Commodity Spread ChargeInter-Commodity Spread CreditSpot (delivery) Add-onThe CCP has informed us that in practice, it uses two models to calculate the applicable initial margin requirement:the Filtered Historical Simulation model with Exponentially Weighted Moving Average, which places more weight on more recent observations and usually reacts faster to market conditions and which incorporates the Exponentially Weighted Moving Average model for validity forecasts from historical returns; and the Parametric VaR Model, which is an unconditional risk measure based on a 10-year lookback period of historical observations and which acts as a margin floor to reduce level of procyclicality as it typically reacts slower to market conditions hence reducing the liquidity burden on CMs.The final initial margin rate will be determined daily by taking the higher value out of both models above.Variation marginThe CCP will mark positions to market to determine the aggregate variation margin for a position account at the intraday clearing cycle and the end-of-day clearing cycle (i.e. at least twice daily). Positions will be marked to market based on the latest prices for the intraday clearing cycle (and any ad-hoc intraday clearing cycles) and the daily settlement price for the end-of-day clearing cycle.Delivery marginThe CCP will determine the delivery margin for positions that have entered the delivery period (i.e. at the date of or the days preceding position maturity through the date of physical delivery).Delivery spot margin: Each contract specification will detail the date at which spot margin is required and whether the spot margin posted by the buyer will form part of the delivery payment to the seller. The amount is referenced in the contract specifications and shall be reviewed by the CCP from time to time to ensure its adequacy. The spot margin will form part of the Margin requirement.Long delivery margin: Each contract specification will detail the date at which long delivery margin is required and the amount that is required for long positions which are held for delivery.Additional marginThe CCP may assess additional margin for a position account (or a group of accounts where appropriate) that demonstrates increased risk and/or exposure to the CCP. The additional margin would be assessed on at least a daily basis at the end-of-day clearing cycle. The types of risks and/or exposure that would require AM include, for example, the following:Large Exposure: Where a position account demonstrates a large exposure relative to other CMs and/or the CCP.If the exposure of a CM exceeds the established percentage threshold (as established by the CCP) relative to the aggregate exposure of the CCP, the CCP will calculate and impose additional margin to reduce the exposure below such threshold.Position Concentration: Where a position account demonstrates high concentration in any specific contract(s).If the concentration of a CM in any specific contract(s) exceeds the established position thresholds (as established by the CCP), the CCP will calculate and impose additional margin based on the materiality of the concentration.Counterparty Credit Risk: Where the financial integrity of a CM (including any related corporations) has weakened or is likely to weaken based on internal risk analysis and/or external indicators (e.g. financial performance metrics, news).If the financial integrity of a CM has weakened or is likely to weaken, the CCP will calculate and impose additional margin based on the materiality of the heightened counterparty credit risk.Discretionary additional margin: here a contract has entered the delivery period, the CCP may impose additional margin to mitigate risks associated with delivery or for other risk mitigation purposes as otherwise determined by the CCP from time to time.Hide noteParagraph 5.3 (Variation Margin), Paragraph 5.4 (Initial Margin), Paragraph 5.5 (Additional Margin), Paragraph 5.6 (Delivery Margin), Clearing Procedures |
| 44.3 For each type of margin, how often does the CCP make margin calls and what is the timing for CMs to meet margin calls? | The CCP performs an intraday clearing cycle and an end-of-day clearing cycle each Trading Day (i.e. at least 2 clearing cycles). Additional ad-hoc intraday clearing cycles may be initiated during a Trading Day where established thresholds are exceeded and/or at the sole discretion of the CCP. At each clearing cycle, the CCP will perform all required calculations, analysis and reconciliations to determine the financial obligations (e.g. Margin requirements) of CMs and the CCP.The Operations Department and the Risk Department of the CCP will review the financial obligations of each CM (including the total Margin requirement for the CM) against the recognised value of collateral on deposit. In the event that a CM’s collateral account(s) do not maintain sufficient collateral, the CCP will generate, as appropriate, requests for, inter alia, Margin call. At the intraday clearing cycle, the CCP has established a Margin collection threshold as the quantitative threshold to trigger a Margin call. The quantitative value will be communicated to CMs through a Circular. The CCP also reserves the right to trigger an ad-hoc intra-day Margin call.Further, the CCP maintains the complete discretion to call on further Collateral for a CM’s Margin Account.The CCP also has the power to make additional Margin calls in certain specified circumstances, including:in the event of a Financial Emergency or an impending Financial Emergency;in the event that the CCP identifies or suspects the development or possible development of a situation or practice likely to disrupt the market, as determined by the Emergency Panel;requiring CMs to pay an intra-day margin to the CCP within such period as the CH determines to be necessary in the event of poor market conditions or severe price fluctuations;if the Hearing Panel is satisfied that the Market Regulation Department has proved on a balance of probabilities that the Respondent has committed the conduct described in the charge, ordering the Respondent (or the relevant CM) to deposit such Margin with the CCP as the Hearing Panel deems appropriate to protect the integrity of positions or otherwise;pursuant to its pre-default procedures; andduring a business continuity event.Hide noteRule 202 (Financial Requirements and Financial Emergencies), Rule 306 (Board’s Powers in Emergencies), Rule 606 (Settlements), Rule 804, Rulebook; Paragraph 8.1 (Clearing Cycle Procedures), Paragraph 10.2.2, Paragraph 12.2.4, Clearing Procedures |
| 44.4 Can the CCP require CMs to post intra-day margin? | Yes. See item 44.3. |
| 44.5 Is there an unmargined intra-day/overnight amount permitted in relation to new Contracts? | Not addressed in the Rules, but Abaxx will issue a circular setting out the mid-day margin call, which may be up to US$50,000. |
| 44.6 Can the CCP provide margin credit so that a CM does not have to transfer funds to meet a margin call? | No. Although this is not addressed in the Rules, the CCP has informed us that it does not provide such margin credit. |
| 45. Suspension of new Contracts pending intra-day margin payments | |
| 45.1 Can the CCP suspend clearing of new Contracts pending payment of an intra-day margin call? | Yes. The CCP has the complete discretion to call on further Collateral for a CM’s Margin Account, and may suspend, halt or unwind transactions until such additional Collateral (as approved by the CCP) is posted to, and received in, the CM’s Margin Account.Also, the CCP may, at its absolute discretion, take such measures including disciplinary action, suspension or termination of membership against a CM who fails to pay any Margin, or any other payment within such times as may be directed and/or notified and/or prescribed by the CCP.Hide noteRule 609 (Margin and Segregated Accounts), Rulebook |
| 45.2 If so, how would this be notified to the CM? | Not addressed in the Rules. |
| 45.3 What steps would the CM have to take to reinstate clearing of new Contracts? | Not addressed in the Rules. |
| 46. Collateral requirements upon Contract registration | |
| 46.1 Does the CCP require a CM to post collateral at the time it registers a Contract? | Yes, in relation to new and existing Contracts.Hide noteRule 609 (Margin and Segregated Accounts), Rulebook |
| 47. Daily collateralisation of Contracts | |
| 47.1 Does the CCP require all Contracts to be fully collateralised on a daily basis? | Yes.Hide noteRule 609 (Margin and Segregated Accounts), Rulebook |
| 48. Credit limits on uncollateralised exposures | |
| 48.1 Can the CCP impose credit limits on specific CMs’ uncollateralised exposures? | Yes.The CCP shall not be required to pay any amount (representing the Daily Settlement Amount) to a CM in the event that such CM fails to meet any required settlement or Margin call for that Trading Day with the CCP.Also, where any obligation under the Rules or as may otherwise be owing to the CCP remains outstanding on the part of a CM, such CM shall have no right to withdraw any Collateral or request for the repayment of any credit balance held with or subject to the control of the CCP without the CCP’s prior consent.Further, disciplinary proceedings may be commenced against a CM for any violation of the Rules (including the requirement to meet any Margin calls / provide Collateral), and sanctions may be imposed on the CM by the Hearing Panel.Hide noteRule 606 (Settlements), Rule 610 (Collateral), Rule 801 (Investigations), Rule 803 (Disciplinary Proceedings), Rule 804 (Sanctions), Rulebook |
| 49. Excess collateral | |
| 49.1 Does the CCP permit CMs to post excess collateral, and how is excess collateral protected at the CCP? | Yes. A CM may deposit or otherwise provide to the CCP Collateral in excess of the amount required by the CCP, subject to such terms and conditions prescribed by the CCP from time to time.Excess Collateral is protected in a similar manner to other Collateral deposited or otherwise provided to the CCP. See item 68.Hide noteRule 610 (Collateral), Rulebook |
| 49.2 If a CM is not permitted to post excess collateral to the CCP, how does the CCP treat any excess collateral at the CCP (e.g., excess margin resulting from a change in the marked-to-market value of the Contracts)? | N/A. |
| 49.3 Is excess collateral automatically returned to the CM, or can a CM request its return at any time? | Yes. The CM may request for the return of all amounts deposited towards Margin with the CCP and such amounts may be returned to the CM if the CCP determines that the amounts deposited are in excess of Margins required for positions.Hide noteRule 609 (Margin and Segregated Accounts), Rulebook |
| 50. Settlement finality for margin | |
| 50.1 When is collateral deemed received from a CM or paid to a CM (settlement finality for margin)? | Settlement instructions to and from the CCP are irrevocable and shall constitute final settlement of any financial obligations of a clearing cycle upon receipt of the SWIFT confirmation (or equivalent) from the settlement bank and/or the custodian by the CCP.Hide noteParagraph 8.2.3, Clearing Procedures |
| 51. Cross-service margining | |
| 51.1 Does the CCP permit cross-service margining? | The Service is the only service provided by the CCP.Hide noteRule 600 (General), Rulebook |
| 51.2 If so, please describe. | N/A. |
| 52. Variation margin haircutting | |
| 52.1 Does the CCP have the right to haircut variation margin or to do something with a similar effect? | Not addressed in the Rules. |
| 52.2 If so, in what circumstances (other than in an end-of-waterfall scenario) is it permitted to exercise this right? | N/A. |
| 53. CCP rights to amend margin methodology/call for additional collateral | |
| 53.1 Can the CCP amend the methodology for determining the margin requirement and/or call for additional margin at any time? | Amending the methodology for determining margin requirementsNot specifically addressed in the Rules. The methods and formulae for calculating the margin requirements and their payment, among other things, will be determined by the CCP and communicated to CMs by way of regulatory notice or such other means as the CCP deems appropriate.The CCP, as an approved clearing house, is required to seek the approval of the MAS prior to making any change to its risk management frameworks, including the methodologies for the determination of margins to manage its risk exposure to its participants.Additional marginSee item 44.3.Hide noteRule 609 (Margin and Segregated Accounts), Rulebook; Regulation 12(1)(a), Securities and Futures (Clearing Facilities) Regulations 2013 |
| 54. Basis for margin calls | |
| 54.1 Is margin for Contracts called for on a gross/trade by trade basis or on a net portfolio basis? | The method of calculation of the Margins (i.e. the initial margin, variation margin, delivery margin and additional margin) may include gross position basis, net position basis, and Customer level basis or any other method as may be decided by the CCP.Margin is called for on a net basis for Net Position Accounts (which may be a house Net Position Account, or a customer Net Position Account belonging to a single beneficial owner) and on a gross basis for an Omnibus Position Account (where there is more than one beneficial owner). Default Position Accounts (which capture positions that have not been assigned to a specific house Net Position account or a customer Position Account) are margined on a gross basis.Hide noteRule 609 (Margin and Segregated Accounts), Rulebook; Paragraph 3.3 (Collateral Settlement and Margin Accounts), Clearing Procedures |
| 55. Netting and set-off | |
| 55.1 Do the Rules provide for the netting and set-off of obligations in the ordinary course (including, for example, netting of variation margin, netting of variation margin and initial margin and netting of any margin and other payments)? | Yes.Hide noteRule 606 (Settlement), Rulebook; Paragraph 8.2.4, Clearing Procedures |
| 55.2 If so, please describe. | Payments for variation margin must be in cash or set-off against the available Collateral deposited towards initial margins.Further, the CCP reserves the right to combine or set-off payments to and from the CM in respect to any settlement obligations, delivery amounts, fees, penalties or any such amounts as may be due between the CCP and the CM.Hide noteRule 606 (Settlement), Rulebook; Paragraph 8.2.4, Clearing Procedures |
| 56. CM provision of cash collateral | |
| 56.1 How is cash collateral in respect of house business provided to the CCP (by way of title transfer or by way of security interest)? | Not specifically addressed in the Rules. We understand from the CCP that cash collateral in respect of house business will be provided to the CCP by way of title transfer. |
| 57. CM provision of non-cash collateral | |
| 57.1 How is non-cash collateral in respect of house business provided to the CCP (by way of title transfer or by way of security interest)? | As a condition of membership, and subject to penalties, all CMs are required to take all steps, including the execution or ratification of any document, to effect the CCP’s lien over all of the Collateral of the CM. Where the CM intends to deposit or otherwise provide non-cash Collateral to the CCP, it shall execute and deliver a Security Deed in the form and on terms prescribed by the CCP, setting out the terms under which its Collateral are provided to, and held by, the CCP. For the avoidance of doubt, and without prejudice and in addition to any Security Interest or other right or remedy which the CCP may have under the Rules, contract, law, or equity, and subject to any applicable restrictions pursuant to MAS Requirements or imposed by the regulatory authority, the CCP shall have a lien on all Collateral deposited with or provided to the CCP and on any other monies or assets of the CM that may be or become available to the CCP.Hide noteRule 610 (Collateral), Rulebook |
| 58. Eligible collateral, haircuts and concentration limits | |
| 58.1 What constitutes eligible collateral? | The CCP shall prescribe the types of Collateral and currencies, whether in cash or non-cash, for the purposes of meeting Margin and GF requirements (and other requirements that may be determined from time to time). The Collateral types and their eligibility to meet such requirements will be communicated through regulatory notice and publication on the website.The CCP requires that any requests for Margin and requests for GF be met by Collateral in the designated settlement currency (USD). However, the CM may arrange for other types of Collateral to be deposited.Hide noteRule 609 (Margin and Segregated Accounts), Rulebook; Paragraph 7.2 (Acceptable Collateral), Paragraph 7.4 (Collateral Management), Clearing Procedures |
| 58.2 Are haircuts applied to any form of eligible collateral? | Yes. The CCP shall, at its sole discretion, determine what assets will be acceptable as Margin and the methodology of valuation to be attributed thereto.If any asset deposited by any CM is found in any way to be unacceptable by the CCP, such asset will immediately be given zero value for the purposes of the CM’s Margin obligations under the Rules, and other assets may be immediately required from the CM as replacement in such an event.The CCP recognises the value of Collateral on deposit at each clearing cycle (and more often as needed) based on current market prices and after consideration to the valuation haircuts and the concentration limits that have been established for each collateral type.The valuation haircuts that apply to each Collateral type will be published through regulatory notice and publication on the website. In particular:There is no valuation haircut or concentration limit for cash Collateral that is denominated in the designated settlement currency (USD).For cash Collateral in currencies other than the designated settlement currency and for non-cash Collateral types, the CCP will establish valuation haircuts and concentration limits that are informed by historical volatility and the liquidation profile of each Collateral type.Hide noteRule 609 (Margin and Segregated Accounts), Rulebook; Paragraph 7.3 (Collateral Valuation and Concentration Limits), Clearing Procedures |
| 58.3 What are the concentration limits or other restrictions in respect of different types of eligible collateral? | See item 58.2.In addition, the CCP may, at its sole discretion, decide and impose conditions on the proportion(s) of or composition of the various assets accepted as Margin. Such conditions may be imposed on any CM or any group or class of CMs, as the CCP deems fit.Hide noteRule 609 (Margin and Segregated Accounts), Rulebook |
| 58.4 Can the CCP require a minimum portion of collateral to comprise cash? | Yes. See item 58.1.Further, the CCP has the right to make a call to replace with cash any of the existing Collateral deposited with the CCP, at any time and in its absolute discretion.Hide noteRule 609 (Margin and Segregated Accounts), Rulebook |
| 58.5 How, when and with what notice period can the CCP change the list of assets that constitute eligible collateral, the concentration limits, and any minimum cash requirement? | List of eligible collateralThe Collateral types and their eligibility to meet such requirements will be communicated through regulatory notice and publication on the website. No notice period is prescribed in the Rules.The CCP, as an approved clearing house, is required to seek the MAS’ approval prior to making any change to its risk management frameworks, including the types of Collateral accepted by it.Concentration limitsSee item 58.3. The concentration limits that apply to each Collateral type will be published through regulatory notice and publication on the website. No notice period is prescribed in the Rules.Minimum cash requirementsSee item 58.4. The Rules do not specify the procedural requirements for amending minimum cash requirements.In addition, the CCP has broad rights to impose additional financial requirements or such other action that is necessary (1) in the event of a Financial Emergency or an impending Financial Emergency or (2) through the imposition of sanctions on a CM, which could permit the CCP to amend its methodology for determining margin requirements, valuation of collateral and list of acceptable collateral.Hide noteRule 202 (Financial Requirements and Financial Emergencies), Rule 804 (Sanctions), Rulebook; Paragraph 7.2 (Acceptable Collateral), Paragraph 7.3 (Collateral Valuation and Concentration Limits); Regulation 12(1)(a), Securities and Futures (Clearing Facilities) Regulations 2013 |
| 59. Substitution of collateral | |
| 59.1 Can the CCP require substitution of eligible collateral at any time and what are the timelines for such substitutions? | Yes.The CCP shall value any assets provided for Margin purposes as it deems appropriate. The CCP shall, at its sole discretion, determine what assets will be acceptable as Margin and the methodology of valuation to be attributed thereto.If any asset deposited by any CM is found in any way to be unacceptable by the CCP, such asset will immediately be given zero value for the purposes of the CM’s Margin obligations under the Rules, and other assets may be immediately required from the CM as replacement in such an event.Further, the CCP has the right to make a call to replace with cash any of the existing Collateral deposited with the CCP, at any time and in its absolute discretion.Hide noteRule 609 (Margin and Segregated Accounts), Rulebook |
| 59.2 What requirements, if any, must be satisfied to permit the CCP to require a substitution? | None. The CCP has absolute discretion to require a substitution (as set out in item 59.1).Hide noteRule 609 (Margin and Segregated Accounts), Rulebook |
| 59.3 Do the timelines depend on whether the CCP or CM initiates a substitution? | No. |
| 60. Non-eligible collateral | |
| 60.1 Does the CCP offer a service under which a CM can post as collateral types of assets that would not otherwise constitute eligible collateral? | No.Hide noteRule 609 (Margin and Segregated Accounts), Rulebook; Paragraph 7.2 (Acceptable Collateral), Clearing Procedures |
| 60.2 If so, please describe. | N/A. |
| 61. CCP rights to apply collateral rules to individual CMs | |
| 61.1 Must the CCP apply the rules addressed in items 59-60 universally or does it have the ability to apply such amendments to individual CMs? | The Board or the Chief Regulatory Officer may agree with a CM or a concerned person to waive or vary particular requirements of the Rules in such circumstances and subject to such conditions as the CCP thinks fit providing that the Board or the Chief Regulatory Officer are satisfied that compliance with the relevant requirements would be unduly burdensome to the CM or person concerned or that compliance with the relevant requirement would not be in the interests of the CCP, and waiver or variation of the requirements does not disadvantage other CMs or create unacceptable risks for the CCP. Waivers or variations of requirements may be publicised at the discretion of the CCP.Hide noteRule 303 (Waiver of Rules or Parts of Rules), Rulebook |
| 62. Collateral pricing sources | |
| 62.1 What sources are used for pricing collateral? | Not specifically addressed in the Rules. We understand from the CCP that, at present, it only accepts Collateral in the designated settlement currency (USD). |
| 63. CCP mitigation of wrong-way risk | |
| 63.1 Please describe how, if at all, the CCP mitigates wrong-way risk (i.e., are CMs prohibited from posting their own debt and equity securities, debt or equity of companies closely linked to them, or debt or equity securities linked to the jurisdiction in which they are organised?). | Not addressed in the Rules. |
| 64. Interest on cash collateral | |
| 64.1 Is interest payable to the CM in respect of cash collateral transferred to the CCP as margin? If so, can there be negative interest rates so that interest is due from the CM? | No. Unless otherwise provided for in the Rules, or unless otherwise required by MAS Requirements, the CCP shall have no obligation to make payment of any fees, interest and investment earnings arising from or in connection with the Collateral to any person. However, administrative fees (payable from a CM to the CCP for the investment and management of the Collateral) may be deducted from the investment earnings arising from or in connection with the Collateral.Also, each CM shall secure contractual waivers in favour of the CM from its Customers waiving their respective rights to all interest and investment earnings from the Collateral held with or otherwise provided to the CCP in respect of Customer Contracts, as may be necessary to give effect to the CCP’s rights in relation to interest and fees.Hide noteRule 610 (Collateral), Rulebook |
| 65. Returns on non-cash collateral | |
| 65.1 Are returns earned on non-cash collateral posted by way of margin passed on to CMs? | No. See item 64.1. |
| 66. Variation margin (daily settlement versus mark to market and two way posting) | |
| 66.1 Is collateral posted in respect of variation margin provided as daily settlement or mark-to-market collateral? | This is not specifically addressed in the Rules, but the Rules suggest that collateral posted in respect of variation margin is provided as daily settlement.Hide noteRule 606 (Settlements), Rulebook |
| 66.2 Does the CCP pay any margin to the CM? If so, please describe. | Yes. Each CM shall be liable to or entitled to collect from the CCP an amount called the “Daily Settlement Amount”, in cash and in the respective currencies of the Contracts. The Daily Settlement Amount on any Trading Day shall be the aggregate of:any variation margin payable by the CM for each Contract on that Trading Day;any variation margin (if any) payable to the CM for each Contract on that Trading Day;any amount receivable/payable by the CM from/to the CCP; andany Margin amount receivable/payable by the CM from/to the CCP,segregated for House Account(s) and Customer Account(s).Hide noteRule 606 (Settlements), Rulebook |
| 67. CM house accounts | |
| 67.1 What house accounts can a CM hold with the CCP (e.g., Contract/collateral/other)? | The CCP will establish and maintain position accounts and collateral accounts for each CM. Each CM must establish collateral accounts with an appointed settlement bank and an appointed custodian for any cash and non-cash collateral.Position accountsPosition accounts belonging to the CM (including any related corporations) are mapped to the house unit. Position accounts will be classified as either a Net Position Account (belonging to a single beneficial owner), maintained on a net basis, or an Omnibus Position Account (belonging to more than one beneficial owner), maintained on a gross basis, depending on the type of positions it captures and the beneficial owner(s) of the position account.The house unit will include a House Net Position Account(s) to capture the positions of the CM (including any related corporations).The house unit will include a Default Position Account, maintained on gross basis, to capture positions of the CM that have not been assigned to a specific house net position account or a customer position account. The CM should allocate such positions as soon as practicable but not to exceed two (2) Trading Days.Collateral accountsFor completeness, a CM is required to establish collateral accounts with at least one (1) appointed settlement bank and with an appointed custodian for any non-cash collateral.A CM is required to establish the following types of collateral accounts with an appointed settlement bank and with an appointed custodian for any non-cash collateral.MSMA: A CM is required to establish at least 1 MSMA denominated in the designated settlement currency of USD. The MSMA collateral account(s) shall correspond to house unit collateral accounts.CSMA: A CM is required to establish at least 1 CSMA denominated in designated settlement currency of USD. The CSMA collateral account(s) shall correspond to customer unit collateral accounts.Member Delivery Settlement Account.Customer Delivery Settlement Account.Where the CCP accepts additional types of collateral, a CM may establish additional MSMAs and/or CSMAs with an appointed settlement bank for cash collateral in other currencies and/or with an appointed custodian for any non-cash collateral types.Hide noteSection 3 (Account Structure), Clearing Procedures |
| 68. Segregation requirements | |
| 68.1 Describe the segregation requirements applicable to Contracts and the related collateral credited to each type of account. | ContractsThe ACS provides a house unit and a customer unit for each CM. Position accounts belonging to the CM (including any related corporations) are mapped to the house unit. Position accounts belonging to the CM’s Customers are mapped to the customer unit.CollateralCollateral held by or otherwise deposited with or provided to the CCP shall be held on trust by the CCP for the benefit of the relevant Customers of the CM pursuant to MAS Requirements, where such Collateral is held by or otherwise deposited with or provided to the CCP solely in respect of Customer Contracts. In particular, the CCP is required to:ensure that the Collateral in respect of Customer Contracts are kept separate from all other money and assets received by the CCP which are deposited or paid for or in relation to the contracts of the CMs;ensure that the Collateral in respect of Customer Contracts are kept separate from the money and assets of the CCP; andwhere notified by the CM, ensure that the books for the Collateral in respect of Customer Contracts are kept separate from the books for the money or assets deposited or paid for or in relation to the contracts of any other Customer.The CCP will establish a MSMA and CSMA at each appointed settlement bank and at each appointed custodian for each approved collateral type. The CCP’s collateral accounts shall hold all collateral received from the corresponding MSMA and CSMA of all CMs.The CCP shall have the right to commingle any or all Collateral held by or otherwise deposited with or provided to it by CMs solely in respect of Customer Contracts, in the same account. For Collateral held by or otherwise deposited with or provided to the CCP for purposes other than the foregoing, the CCP shall have the right to commingle any or all such Collateral in the same account.Hide noteRule 610 (Collateral), Rulebook; Paragraph 3.1 (ACS Position Accounts), Paragraph 3.3.4, Clearing Procedures; Regulation 23, Securities and Futures (Clearing Facilities) Regulations 2013 |
| 68.2 Is the CCP obligated to segregate collateral received through margin calls in respect of CMs from its own assets or the margins of other CMs? | Yes, in respect of Collateral held by or otherwise deposited with or provided to the CCP solely in respect of Customer Contracts. See item 68.1. However, the CCP has the right to commingle such Collateral in the same account.Hide noteRule 610 (Collateral), Rulebook; Paragraph 3.1 (ACS Position Accounts), Paragraph 3.3.4, Clearing Procedures; Regulation 23, Securities and Futures (Clearing Facilities) Regulations 2013 |
| 69. CM affiliate Contracts | |
| 69.1 Are Contracts held by a CM for its affiliates treated as house or Client Contracts? | Contracts held by a CM for its related corporations are treated as house Contracts.Hide noteParagraph 3.1 (ACS Position Accounts), Clearing Procedures |
| 69.2 Are Contracts held by a CM for its affiliates segregated from the house Contracts of the CM? | No.Hide noteParagraph 3.1 (ACS Position Accounts), Clearing Procedures |
| 70. Allocation of collateral | |
| 70.1 How is collateral allocated to the relevant account? | A CM is required to allow the CCP to direct debit (or equivalent reference) designated collateral accounts for the purpose of meeting its financial obligations to the CCP by entering into an agreement with each settlement bank and each custodian. The agreement will authorise the CCP to direct debit (or equivalent reference) such accounts in accordance with the terms of the agreement without any further reference to or authority from the CM.The CCP will determine the request for Margin and the request for GF at each clearing cycle and initiate a USD Direct Debit at the designed settlement bank for the CM MSMA(s) and the CM CSMA(s) to be credited at the corresponding account(s) of the CCP.Hide noteParagraph 3.3.2, Paragraph 7.4.1, Clearing Procedures |
| 71. CM withdrawal process | |
| 71.1 Should a CM wish to withdraw from the CCP (i.e., terminate its CM status) or from the Service in the ordinary course, what specific steps would need to be followed and what conditions would need to be met? | A CM may resign from being a CM by giving the CCP written notice of its wish to resign from membership (a “Resignation Notice”). No resignation of membership shall be effective unless:the CM shall first have paid the CCP, as the case may be, all monies owed by it to the CCP;the CM shall first have closed out all positions held on behalf of Customers in accordance with instructions from those Customers or transferred all such positions to another suitable CM, such transfer not to occur without the approval of those Customers;all Customers’ monies, and assets held by such CM in respect of its business as CM have been returned to the Customers; andthe CM has complied with such measures, terms, or conditions as imposed by the CCP.A CM that gives a Resignation Notice must provide the CCP with such information concerning the circumstances of the resignation as, in the opinion of the CCP, is necessary for the CCP to determine whether to delay the effective date of the resignation. The CCP may, in its absolute discretion, refuse to accept a Resignation Notice given by a CM or postpone the effective date if it considers it necessary for the protection of Customers, or otherwise in the interests of the market and the CCP. If the CCP does so, the CCP may waive the CM’s liability for some or all CCP fees, levies and charges arising in respect of the period following the date on which its Resignation Notice would otherwise have taken effect.The CCP may take any other measures before or after the resignation takes place to protect the market.Hide noteRule 212 (Resignation of Member), Rulebook |
| 71.2 If a CM gives notice of its intention to withdraw, what date will be the Withdrawal Notice Date? | The Withdrawal Notice Date will be the date on which the CCP receives a Resignation Notice from the CM.Hide noteRule 212 (Resignation of Member), Rulebook |
| 71.3 Is there a minimum notice period for CM withdrawal? | No. The Rules provides that, subject to the CCP’s discretion to refuse to accept a Resignation Notice or to postpone the effective date of resignation, a resignation of membership shall be effective upon the fulfilment of certain conditions: see item 71.1.Hide noteRule 212 (Resignation of Member), Rulebook |
| 71.4 Is membership withdrawal contingent upon the approval of the CCP? | Yes. The CCP may, in its absolute discretion, refuse to accept a Resignation Notice given by a CM or postpone the effective date if it considers it necessary for the protection of Customers, or otherwise in the interests of the market and the CCP.Hide noteRule 212 (Resignation of Member), Rulebook |
| 71.5 Is the ability/procedure for a CM to withdraw restricted or different if there has been a default by another CM? | No. However, the CCP may, in its absolute discretion, refuse to accept a Resignation Notice given by a CM or postpone the effective date if it considers it necessary for the protection of Customers, or otherwise in the interests of the market and the CCP. This may include situations involving the default of another CM.Hide noteRule 212 (Resignation of Member), Rulebook |
| 72. Conditions imposed on withdrawing CM | |
| 72.1 Can the CCP impose any conditions on the withdrawing CM after Withdrawal Notice Date until the Withdrawal Effective Date? | Yes. The CCP may take any other measures before or after the resignation of a CM takes place to protect the market.Hide noteRule 212 (Resignation of Member), Rulebook |
| 73. Liability End Date | |
| 73.1 What date will be the CM’s Liability End Date? | The CM’s Liability End Date is the same day as the Withdrawal Effective Date. See item 74.1.Hide noteRule 212 (Resignation of Member), Rule 611 (Guaranty Fund), Rulebook |
| 74. Withdrawal Effective Date | |
| 74.1 What date will be the CM’s Withdrawal Effective Date (e.g., upon notice to the CCP of such CM’s withdrawal, upon termination of all Contracts, or otherwise)? | The CM’s Withdrawal Effective Date shall be, following the CCP’s approval of its resignation and the satisfaction of all of its obligations in relation to its resignation as established by the CCP, the effective date of resignation as announced by the CCP.Hide noteRule 611 (Guaranty Fund), Rulebook |
| 75. Obligations and liabilities of withdrawing CMs during withdraw process | |
| 75.1 In general terms, what are the obligations and liabilities of withdrawing CMs during the period between the Withdrawal Notice Date and the Withdrawal Effective Date? | Not specifically addressed in the Rules. However, it would appear that a CM who has given a Resignation Notice would continue to have the rights and obligations of a CM until the Withdrawal Effective Date, and any additional terms or conditions as imposed by the CCP.Further, CMs shall remain liable to contribute towards any default or additional assessment arising therefrom until the Withdrawal Effective Date.Hide noteRule 212 (Resignation of Member), Rule 611 (Guaranty Fund), Rulebook |
| 75.2 What is the scope of the CM’s liability to the default fund following the Withdrawal Notice Date but on or before the Liability End Date? | See item 75.1. |
| 75.3 Can the CCP increase the size of the withdrawing CM’s default fund contribution requirement after its Withdrawal Notice Date? | Yes. A withdrawing CM’s liability to make the required Guaranty Fund Contribution remains until the effective date of its resignation (i.e. the Withdrawal Effective Date) is approved and announced by the CCP. Until such time, the CCP could potentially increase the size of the withdrawing CM’s Guaranty Fund Contribution after its Withdrawal Notice Date, if the CCP assesses that it is necessary to issue an interim report to increase all CMs’ Guaranty Fund Contributions.Hide noteRule 611 (Guaranty Fund), Rulebook |
| 75.4 What is the scope of the CM’s liability to the default fund following the Liability End Date but before the Withdrawal Effective Date? | None. The Liability End Date is the same day as the Withdrawal Effective Date.Hide noteRule 611 (Guaranty Fund), Rulebook |
| 75.5 Does the CM remain liable in any way following the Withdrawal Effective Date? | No. The Liability End Date is the same day as the Withdrawal Effective Date.Hide noteRule 611 (Guaranty Fund), Rulebook |
| 76. Return of unused default fund contributions | |
| 76.1 When would unused default fund contributions of the CM be returned? | CMs whose resignation or termination have been approved by the CCP shall have their Guaranty Fund Contributions returned on the commencement of the next Guaranty Fund Period.Hide noteRule 611 (Guaranty Fund), Rulebook |
| 77. Extension of deadline for the return of unused default fund contributions | |
| 77.1 Is there an ability to extend the normal deadline by which default fund contributions of the CM must be returned? | Not addressed in the Rules. |
| 78. Non-default suspension/termination of CM membership | |
| 78.1 In what circumstances can the CCP suspend or terminate the membership of a CM other than if the CM defaults? | The CCP may suspend or terminate the membership of any CM at its sole discretion. Further, the CCP may suspend in whole or in part, a CM’s privileges for up to a period of 1 year upon the occurrence of certain specified events.Financial EmergenciesIn the event of a Financial Emergency or an impending Financial Emergency, the CCP, or any committee thereof, may suspend or terminate the membership of any CM.Failure to comply with Margin requirementsThe CCP may, at its absolute discretion, take such measures including suspension or termination of membership against a CM who fails to pay any Margin, or any other payment within such times as may be directed and/or notified and/or prescribed by the CCP.SanctionsThe sanctions which the CCP (through the Hearing Panel) may impose on a CM in connection with any disciplinary proceedings include (1) suspending any or all of the relevant CM’s privileges of membership or (2) suspending or terminating the relevant CM.The CCP has, in its absolute discretion, the power to suspend or restrict a CM whenever the CCP considers it necessary or desirable to do so in order to protect its interests or the interests of other CMs or of any related Clients, or if the CCP deems a CM as posing a threat to the CCP or other CM’s financial wellbeing.Financial conditionIf a CM defaults under any term of any loan or agreement relating to its indebtedness, or if it fails or is unable to pay its debts when they are due, it may be deemed to be insolvent, and the CCP has discretion to decide if it will restrict or suspend the CM in question.No fault suspensionThe CM has the right to, at any time, request the CCP suspend its membership. The CCP has the right to give effect to the suspension, upon such terms and conditions as the CCP decides.Breach of agreementThe CCP may terminate the membership of a CM for the failure to perform a duty or commission of a material breach by the CM of the Rules or any agreement between the CCP and the CM.If a CM fails to comply with any Rules provision, they may face suspension or expulsion at the discretion of the CCP.If a CM fails to perform, or is in breach of any Rules provisions, Directive, or any agreement or arrangement related to the CM’s relationship with the CCP, and the CCP is of the opinion that such failure or breach may materially compromise the CM’s financial or behavioral integrity, the CCP may restrict or suspend the CM without prior notice.If a CM fails to comply with or settle any financial obligations under the rules of any CCP of which it is a member, and the CCP is of the opinion that such failure to comply may materially compromise the CM’s financial or behavioral integrity, the CCP may restrict or suspend the CM without prior notice.Failure to meet eligibility criteriaIf, in its absolute discretion, the CCP determines that a CM no longer meets the relevant eligibility criteria due to insolvency, lack of a relevant license, or its inability to operate a safe and efficient clearing facility, the CCP may restrict or suspend that CM’s eligibility to have Contracts registered in its name. This may include an instance in which the CM fails to comply with any Rules provision, Directive in force, or any agreement between the CM and CCP.If a CM is suspended or expelled from membership of any relevant market, and the CCP is of the opinion that such suspension/expulsion may materially compromise the CM’s financial or behavioral integrity, the CCP may restrict or suspend the CM without prior notice.If a CM ceases to hold a valid capital markets services licence (as required under the SFA) unless otherwise exempted, or is no longer authorized to conduct banking business in Singapore pursuant to Section 4 of the Banking Act 1970, the CCP is entitled to restrict the activities or suspend the CM altogether, without prior notice.Hide noteRule 202 (Financial Requirements and Financial Emergencies), Rule 210 (Suspension and Termination), Rule 609 (Margin and Segregated Accounts), Rule 804 (Suspension), Rulebook |
| 78.2 How, if at all, would the responses to items 72-77 differ in such circumstances? | A suspension or termination of clearing privileges does not in any way affect the liabilities of the CM to the CCP or other CMs and all such liabilities shall subsist until satisfied or discharged.In the event the CCP suspends or terminates a CM’s privileges, the CCP may direct the affected CM to take such steps that the CCP deems fit for the protection of Customers or the maintenance of a fair, orderly and transparent market and a safe and efficient CCP. The affected CM shall cooperate fully with the CCP with respect to such directions.In the event of a suspension, the CCP may utilize the suspended CM’s contribution to the Guaranty Fund for any purpose it thinks fit, including without limitation to satisfy the CM’s obligations to its Customers or the CCP, for as long as the CM has any positions.In the event of a termination, the membership of the CM who has been terminated is deemed to be revoked immediately and any rights the CM enjoyed thereunder is deemed to be relinquished.Hide noteRule 211 (Effect of Suspension or Termination), Rulebook |
| 79. Rule change process | |
| 79.1 What process must the CCP follow in order to change any of its rules (or bylaws, if applicable) under normal circumstances (i.e. excluding the exercise of any emergency powers)? | The CCP is required to consult its participants on proposed rule amendments unless the proposed amendment would have a limited impact on the participants. However, the CCP is not obliged to consult its participants where permitted pursuant to the SFA in the event that the CCP determines that an emergency situation exists. When considering the impact of a proposed rule amendment on its participants, the CCP shall consider the likely effect that the amendment would have on the rights, obligations, operations and systems of CMs and other affected persons.Additionally, the CCP will notify the MAS of the proposed amendment, its purpose and the proposed date on which it will come into force. Every rule change must comply with requirements as prescribed by the MAS and the SFA. The MAS has the power to disallow, alter or supplement any proposed changes to the CCP’s Rules.The date on which the amendments come into force must be at least 21 days after notification to the MAS (although the MAS may shorten this period). The foregoing requirements do not apply to periodic amendments to initial margin requirements of a contract, if the amendment is in response to a change in the volatility of the contract or the co-relation between contracts.The CCP shall announce any amendment to the Rules through a regulatory notice, and such amendment shall take effect at such time and in such manner as the CCP may determine, subject to applicable law. No amendment to the Rules shall take effect earlier than the publishing of the relevant regulatory notice and/or the requisite regulatory approval.If the CCP, in its absolute discretion, determines that a change of legislative or regulatory provisions of Singapore, any other country or any international organisation, or of institutions or market organisations in any country or group of countries, (including without prejudice to the generality of the foregoing, a change in respect of duties or taxes) has affected, is affecting or is likely to affect the normal course of business, the CCP shall have the power (without prejudice to its powers under any other provision of the Rules) to amend the Rules in any way it deems necessary or desirable for the preservation of the orderly course of business, subject to applicable law.Such amendment may be made notwithstanding it may affect the performance or value of existing Contracts (or such existing Contracts as may be specified by the CCP). Without limiting its powers hereunder, the CCP will use its best endeavours to keep any such variation to the minimum that it considers reasonably necessary to deal with the situation.Hide noteRegulation 30, Securities and Futures (Clearing Facilities) Regulations 2013; Rule 309 (Rule Amendments), Rulebook |
| 79.2 Must the CCP provide notice to (or otherwise consult with) CMs prior to the rule change becoming effective under normal circumstances? | The CCP is required to consult the CMs, unless the proposed amendment has limited impact on them. See item 79.1.Hide noteRegulation 30, Securities and Futures (Clearing Facilities) Regulations 2013; Rule 309 (Rule Amendments), Rulebook |
| 79.3 If so, what is the length of the notice period? | The rule change will only come into force if the prescribed times for effecting rule changes are met under the SFA, as well as other applicable laws. By default, the prescribed time is 21 days after notification to the MAS. See item 79.1.Hide noteRegulation 30, Securities and Futures (Clearing Facilities) Regulations 2013; Rule 309 (Rule Amendments), Rulebook |
| 79.4 Can rule changes be made to take effect retrospectively? | No. The Rules do not provide for retrospective changes.Hide noteRule 309 (Rule Amendments), Rulebook |
| 80. CM rights in respect of rule changes | |
| 80.1 Describe any rights of CMs (including ballot rights) to approve, object to, and/or prevent the implementation of a particular change to the Rules under normal circumstances. | CMs have no rights to prevent or object to proposed rule amendments, but the CCP must consult with the CMs unless the proposed amendment would have a limited impact on the participants (as noted in item 79.1).Hide noteRegulation 30, Securities and Futures (Clearing Facilities) Regulations 2013; Rule 309 (Rule Amendments), Rulebook |
| 81. Regulatory approval of rule changes | |
| 81.1 Do Rules changes need to be approved by one or more of the regulators under normal circumstances? | No. However, proposed rule changes must first be submitted to the MAS. See item 79.1.Also, the MAS has the power to disallow, alter or supplement any proposed changes, in accordance with the relevant laws and provisions. The typical review period for the MAS is 21 days, although the MAS may extend it. This does not apply to certain periodic amendments to initial margin requirements.Hide noteRegulation 30, Securities and Futures (Clearing Facilities) Regulations 2013; Rule 309 (Rule Amendments), Rulebook |
| 81.2 Are different types of changes (e.g., changes under normal circumstances and changes in emergency situations) subject to different regulatory approval processes? | The CCP must notify the MAS of any proposed changes to the Rules before they are made. The MAS has the power to disallow, alter or supplement any proposed changes, in accordance with the relevant laws and provisions. There is no express provision for emergency situations; however, the MAS may at its discretion shorten the 21 day review period and allow the amendments to come into effect less than 21 days after the MAS receives notification of the amendments.Hide noteRegulation 30, Securities and Futures (Clearing Facilities) Regulations 2013 |
| 82. Emergency rule change process | |
| 82.1 Does the CCP have any special rulemaking powers in the event of an emergency (including a market emergency)? | If the CCP, in its absolute discretion, determines that a change of legislative or regulatory provisions of Singapore, any other country or any international organisation, or of institutions or market organisations in any country or group of countries, (including without prejudice to the generality of the foregoing, a change in respect of duties or taxes) has affected, is affecting or is likely to affect the normal course of business, the CCP shall have the power (without prejudice to its powers under any other provision of the Rules) to amend the Rules in any way it deems necessary or desirable for the preservation of the orderly course of business, subject to applicable law (which would include Regulation 30 of the Securities and Futures (Clearing Facilities) Regulations 2013 – see item 79.1 above).Also, the CCP is not obliged to consult its participants where permitted pursuant to the SFA in the event that the CCP determines that an emergency situation exists.Hide noteRegulation 30, Securities and Futures (Clearing Facilities) Regulations 2013; Rule 309 (Rule Amendments), Rulebook |
| 82.2 Can the CCP invoke emergency rulemaking powers solely by reason of a CM default? | Not specifically addressed in the Rules. |
| 82.3 Are there any internal procedural checks to such emergency rulemaking powers? | N/A. |
| 83. Definition of “emergency” | |
| 83.1 What constitutes an “emergency”? | The term “emergency situation” is not defined, but would include any declaration of a Force Majeure Event and other emergency situations such as the occurrence of a Financial Emergency.“Financial Emergency” is defined to mean any event, occurrence, or circumstance that may affect the financial integrity of the Exchange, the CCP, or any of the CMs.Hide noteRule 306 (Board’s Powers in Emergencies), Rule 309 (Rule Amendments), Rulebook |
| 84. Procedural checks on emergency rule changes | |
| 84.1 Describe any notification or consultation obligation on the CCP and/or any notice period before any action can become effective in an emergency situation rule change. | See item 82.1. |
| 84.2 Describe any rights of CMs (including ballot rights) to approve, object to and/or prevent the implementation of a particular action in an emergency situation. | See item 80.1. |
| 84.3 Can the CCP override any of these consultation rights, notice periods, ballot or other rights of CMs in an emergency? | There is no express provision for this. |
| 85. Additional procedural checks on emergency rule changes | |
| 85.1 Are there any other procedural checks to such emergency rulemaking powers? | No. |
| 86. Additional CCP rights to waive/suspend Rules | |
| 86.1 Does the CCP have any other rights outside of any emergency powers to waive or suspend the Rules? | Yes. The Board or the Chief Regulatory Officer may agree with a CM or a concerned person to waive or vary particular requirements of the Rules in such circumstances and subject to such conditions as the CCP thinks fit providing that the Board or the Chief Regulatory Officer are satisfied that compliance with the relevant requirements would be unduly burdensome to the CM or person concerned or that compliance with the relevant requirement would not be in the interests of the CCP, and waiver or variation of the requirements does not disadvantage other CMs or create unacceptable risks for the CCP. Waivers or variations of requirements may be publicised at the discretion of the CCP. Hide noteRule 303 (Waiver of Rules or Parts of Rules), Rulebook |
| 87. Invoicing Back | |
| 87.1 Does the CCP have the ability to (i) close out a CM’s Contract or (ii) liquidate Contracts on opposite sides of the market in emergency (but not default) conditions through Invoicing Back Contracts with CMs or third party-CMs for the purposes of liquidation of Contracts? | Not specifically addressed in the Rules, but the CCP has the power to take certain actions in the event of (1) any emergency situation or (2) a Financial Emergency or an impending Financial Emergency.The Rules provide for the CCP’s power to order liquidation of all or a portion of a CM’s House and/or Customers’ Accounts, or of positions of which the holder is unable or willing to make or take delivery, and more generally the power to (1) take such action as may in the Board’s sole discretion appear necessary to prevent, correct or alleviate the emergency condition and (2) take any action as the CCP thinks necessary or desirable to resolve the Financial Emergency.See item 107.1 on the CCP’s rights in relation to Invoicing Back Contracts in default conditions.Hide noteRule 202 (Financial Requirements and Financial Emergencies), Rule 306 (Board’s Powers in Emergencies), Rulebook |
| 87.2 If so, by what mechanism is the pricing determined? | Not addressed in the Rules. |
| 87.3 What is the timing for Invoicing Back? | Not addressed in the Rules. |
| 87.4 For Invoicing Back, is Client business treated separately from house business? | Not addressed in the Rules. |
| 88. Forced Allocation | |
| 88.1 Does the CCP have the right to force-allocate Client and house Contracts to third-party CMs in emergency (but not default) conditions? | Not specifically addressed in the Rules, but the CCP has the power to take certain actions in the event of (1) any emergency situation or (2) a Financial Emergency or an impending Financial Emergency.Emergency situationsThe Rules expressly provide for the CCP’s power to order a transfer of all or a portion of a CM’s House and/or Customer Accounts. The CCP does not have the right to force-allocate Client and house Contracts in default conditions. See item 106.1.Hide noteRule 202 (Financial Requirements and Financial Emergencies), Rule 306 (Board’s Powers in Emergencies), Rulebook |
| 88.2 If so, by what mechanism are the pricing, size of allocations, and CM recipients determined? | Not specifically addressed in the Rules. |
| 88.3 What is the timing for Forced Allocation? | Not specifically addressed in the Rules. |
| 88.4 For Forced Allocation, is Client business treated separately from house business? | Not specifically addressed in the Rules. |
| 89. Amendments to Contract specifications | |
| 89.1 Can the CCP make amendments to Contract specifications? | All Contracts (and the specifications thereof) are subject to the Board’s emergency powers under the Rules. We also understand from the CCP that Contract specifications are under the purview of the Exchange, and amendments to Contract specifications will be dealt with as rule amendments.Hide noteRule 306 (Board’s Powers in Emergency), Rulebook |
| 89.2 Can amendments to Contract specifications be made on a retroactive basis? | Not specifically addressed in the Rules. |
| 89.3 Describe any rights of CMs (including ballot rights) to approve, object to and/or prevent the implementation of a particular change to the Contract specifications. | Not specifically addressed in the Rules. |
| 90. Events of default | |
| 90.1 What constitutes an “event of default” by a CM? Please list all possible options that may constitute an event of default (including any grace periods) and note where the CCP has discretion to determine these | Events of defaultThe below may constitute an “event of default” by a CM under the Rules.Breach of Rulebook/agreement; suspension of transfer, termination and other rights under co-operating clearing house rulesNo, apart from exchange rules violations listed elsewhere in this answer.Breach of exchange/clearing house membership terms and/or rulesNo, apart from exchange rules violations listed elsewhere in this answer. However, the CCP:is entitled to suspend or terminate the membership of any CM at its sole discretion; andmay suspend in whole or in part a CM’s privileges for up to a period of 1 year upon the occurrence of certain specified events, including where it is necessary or desirable, in the CCP’s opinion, to protect the financial integrity, reputation or interest of the CCP.Suspension of membership/authorisation and/or other action by a regulatory bodyNo. However:the CCP is entitled to suspend or terminate the membership of any CM at its sole discretion; andthe CCP may suspend in whole or in part a CM’s privileges for up to a period of 1 year upon the occurrence of certain specified events, including the cessation, suspension or termination of its membership with any other exchange.Failure to pay the CCPYes. In the event that a CM does not discharge its obligations to the CCP, the CCP may in its absolute discretion declare that CM to be in default.Failure to pay/perform under any agreementYes. In the event that a CM does not discharge its obligations to the CCP, the CCP may in its absolute discretion declare that CM to be in default.Insolvency-related eventsYes. In the event that a CM becomes subject to any liquidation, insolvency, bankruptcy, reorganization, arrangement, moratorium, or similar proceeding, the CCP may in its absolute discretion declare that CM to be in default.Automatic Early Termination EventsNo.OtherNo.The Rules do not explicitly provide for any grace periods. However, the CCP has the discretion as to whether to declare a CM to be in default.Hide noteRule 210 (Suspension and Termination), Rule 612 (Default of Clearing Members), Rulebook |
| 91. Process for declaration of CM default | |
| 91.1 What is the process for declaring a default (including whether the CCP has to consult with its board, its risk committee and/or its local regulators)? | The CCP may initiate certain pre-default procedures, including, for example, the following actions:Engage with the designated CM representatives to understand the nature of any such observations and measures being taken to address and mitigate the potential impact.Dispatch staff to the CM to understand the nature of any such observations and measures being taken to address them or in the event of an imminent default to initiate default management procedures.Request more frequent updates on the CM’s balance sheet details.Limit the ability of the CM to increase overall risk exposure to the CCP and/or require risk-reducing measures, such as, risk-reducing trades to reduce risk exposure to the CCP.Require the CM to increase financial resources (e.g., post additional margin) and/or limit the ability to withdraw excess collateral.The CCP will also have regular updates and communication with the MAS in the build-up to any potential default.The CEO of the CCP (or its designee), in consultation with the Default Management Team and the Crisi Management Team of the CCP, is responsible for formally declaring a CM in default. Upon the declaration of a default, the CCP shall notify the defaulting CM and issue a regulatory notice to give notice of the default and the commencement of default management procedures. The regulatory notice shall provide the following information:Name of the defaulting CMDate and cause of the defaultReference to additional information (e.g. website, CCP contact)The CCP will ensure timely and transparent external communication in the event that a CM has been declared in default. All external communication will be approved by the Market Regulation Department before it is communicated in order to ensure consistency, clarity and transparency. The CCP will establish in advance templates for primary communications to (a) the MAS (b) regulatory notices (c) public communications and (d) the appointment of liquidation brokers, to ensure all necessary information is disclosed.Also, the CCP may inform any relevant regulatory authority of a default prior to declaring a default and disclose such information to such regulatory authority as it sees fit.Hide noteRule 612 (Default of Clearing Member), Rulebook; Paragraph 10.3 (Declaration of Default), Clearing Procedures; Paragraph 2.1 (Increased monitoring of at-risk Clearing members), Paragraph 2.4 (Regulatory Notification), Paragraph 3 (Default Activation), Default Management Playbook |
| 91.2 Is the CCP required to inform, and/or get consent from, a local regulator prior to determining that there has been an event of default by a CM? | No. However, the CCP, as an approved clearing house, is required to:notify the MAS as soon as practicable after the CCP becomes aware of any financial irregularity or other matter which in its opinion may affect the ability of any CM to meet its financial obligations to the CCP; andimmediately give the MAS notice of its intent to make a declaration that any CM has defaulted or to commence default proceedings against any CM.Hide noteSection 58(1)(d)(i), SFA; Regulation 11(4), Securities and Futures (Clearing Facilities) Regulations 2013 |
| 92. CCP communication procedures in respect of CM default | |
| 92.1 Upon the occurrence of default, what are the CCP’s procedures for communication relating to the default (specifically, does the CCP communicate the occurrence of a default and/or the suspension of membership to CMs, Clients and/or other CCPs, in addition to regulators)? | See items 91.1 and 91.2.Hide noteRule 612 (Default of Clearing Member), Rulebook; Paragraph 10.3 (Declaration of Default), Clearing Procedures; Section 58(1)(d)(i), SFA; Regulation 11(4), Securities and Futures (Clearing Facilities) Regulations 2013 |
| 93. CCP determination of CM or Client default | |
| 93.1 How does the CCP determine whether a default is associated with a Client account or house account? | The Rules do not discuss whether the CCP is required to determine whether a default is associated with a Customer Account or House Account, as a default by a CM affects all its accounts. |
| 94. CCP rights in respect of collateral upon a CM default | |
| 94.1 Upon a CM default, what rights does the CCP have with respect to collateral? | The CCP is entitled to utilize the Collateral of the defaulting CM to satisfy the obligations of the CCP and the defaulting CM.Hide noteRule 612 (Default of Clearing Members), Rulebook; Paragraph 10.3.5, Paragraph 10.5 (Default Resources), Clearing Procedures |
| 94.2 Does the CCP have to take any steps to enforce its rights in relation to collateral? | We understand from the CCP that, at present, it only accepts Collateral in the designated settlement currency (USD), which is provided to the CCP by way of title transfer. Accordingly, the CCP does not need to take any additional steps to enforce the cash Collateral. |
| 94.3 Does the CCP ordinarily liquidate all non-cash collateral to cash? | Yes, the Clearing Procedures state that the CCP will initiate actions to liquidate and convert any cash Collateral in other currencies and any non-cash Collateral of the CM to the designated settlement currency (USD).Hide noteParagraph 10.5.1, Clearing Procedures |
| 95. Settlement of payment obligations following a CM default | |
| 95.1 How do CCP Rules enable it to settle payment obligations on time following any individual or combined default among its CMs? | See CM Default – Default Process (items 100-108). |
| 96. Netting and set-off following a CM default | |
| 96.1 Do the Rules provide for the netting and set-off of obligations, including obligations to return collateral, upon the default of a CM? | Not specifically addressed in the Rules, but note the statutory provisions relating to the default of a CM under Singapore law (specifically Section 219 of the Insolvency, Restructuring and Dissolution Act 2018, and Sections 81E, 81F, 81G, 81H and 81L of the SFA).Hide noteSection 219 of the Insolvency, Restructuring and Dissolution Act 2018; Sections 81E, 81F, 81G, 81H and 81L, SFA |
| 96.2 Is a net amount calculated per account? | While not specifically addressed in the Rules, the CCP would calculate a net amount payable by or to the defaulting CM, as required to do so under the SFA.Hide noteSections 81E and 81F, SFA |
| 97. Calculation of termination amount | |
| 97.1 How is the termination amount calculated (describe the methodology for determining the termination amount, including timing; specify each termination amount that could be calculated and each service that would be included in the calculation of each termination amount, and note any distinctions between Client and house accounts)? | The Rules only explicitly provide for the calculation of a termination amount in the context of a CCP default. See item 144 for more details.Also, following the conclusion of the transfer or close out of the defaulting CM’s open positions, the CCP’s finance department will prepare a complete analysis of the cost undertaking the transfer or close-out on collateral and cash cover held in order to arrive at the final net sum, which shall consist of:Details of losses incurred, and profits made in closing out positions including trading fees paid to liquidation brokers.Any sums paid or received in maintaining open positions prior to closure – including EOD or intraday variation margins for each day the positions remained open.Margin collateral utilised to offset losses and costs incurred.Hide noteParagraph 5.1 (Calculation of losses incurred in default management), Default Management Playbook |
| 98. Net termination amounts for multiple services | |
| 98.1 If the CCP offers more than one service, does the net termination amount include amounts due to/from the CCP in respect of other services? | N/A. |
| 99. Payment of termination amounts and return excess collateral/remaining default contributions to defaulting CMs | |
| 99.1 When is the CCP required to pay any termination amount, return surplus collateral and any remaining default contribution to the defaulting CM? | The Rules do not address this in the case of a CM default. In the case of a CCP default, the Termination Amount must be paid by the close of business on the Business Day after the notification of the amount. Hide noteRule 613 (Default of the Clearing House), Rulebook |
| 100. Default process | |
| 100.1 What are the CCP’s specific default procedures? | In the event of a default, the CCP may take any action it considers appropriate including but not limited to:closing out all of the Defaulter’s House Account positions (e.g., liquidation and/or auction);transferring a portion or all of the positions of a Customer of the Defaulter to another CM;transferring any remaining Margins which are associated with such positions;closing out a portion or all of the positions of a Customer Account of the Defaulter; orany such additional actions required to re-establish a matched book.The default procedures may include the following actions, however the decision to apply a specific action(s), and the order in which to apply such actions, shall depend on the nature of the default, the market characteristics at such time and be at the sole discretion of the CCP.The CCP will perform default procedures and collateral liquidation procedures separately for the house unit and the customer unit. Upon completion of default procedures for the CM house unit, if there are any excess financial resources available, they will be made available for the default procedures of the customer unit. However, financial resources of the customer unit are not permitted to be available for default procedures of the house unit (unless otherwise provided for under Regulation 24 of the Securities and Futures (Clearing Facilities) Regulations 2013).The CCP will consider the following actions to re-establish a matched book:Hedge position account and/or CM Unit risk exposure through liquidation agents to reduce costs associated with Margin requirements, liquidation(s) and/or auction(s). Such actions may be performed at the position account and/or CM Unit level. Hedging could be performed on the Exchange, at another exchange that has related products that exhibit similar characteristics or in the over-the-counter market.Close-out positions through liquidation and/or auction procedures. The CCP shall determine which action or combination of actions to apply with consideration to any other default procedures.If such actions fail to or are likely to fail to re-establish a matched book, the CCP may consider other measures within the scope and application of the recovery procedures.The CCP will (together with the Default Management Team, the Default Management Panel and liquidation brokers), perform a portfolio analysis in determining whether the assets of the CM should be hedged or liquidated. This comprises:an analysis of the positions held by the CM including portfolio composition, risk exposure by position account and by member unit (house or client), collateral value by position account and member unit; andan assessment of the fair value of the portfolio using the most recent price. Prices in the clearing system are updated hourly and compared to the breakeven price. The frequency of updates will be adjusted in times of default to allow for a more frequent update of prices. Other considerations include potential loss of portfolio and cost arising from winding down the position.The CCP may close-out positions belonging to the CM and/or the CM’s customer(s) through a liquidation process performed by liquidation agents and/or through any appointed CM(s).In particular, where the CCP inherits positions in any Contracts which are close to maturity (within next 5 Business Days), the CCP may need to execute close-out trades prior to them maturing into delivery positions. This will reduce the operational burden for the CCP of having to administer a physical delivery. The details of the actions from the CCP will be disclosed to the non-defaulting CMs and their clients so they can respond accordingly.The CCP may close-out positions belonging to the CM and/or the CM’s customer(s) through an auction process performed by the CCP. In an auction, the CCP will seek to liquidate the remaining portfolio of the CM at a reasonable estimate of its market value while seeking to limit disruptions to the markets.The CCP shall announce the schedule of auction procedures including, distribution of position/portfolio for CM review, deadline for auction bids and announcement of auction results. The CCP shall provide in advance all conditions of the auction process.The CCP may divide the positions of the CM into discrete blocks to form auction portfolios where the CCP determines that such actions will contribute to the success of the auction(s) (unless otherwise prohibited by any Rule and/or regulation). In practice, the CCP will aim to have the lowest number of auctions as possible as to minimise operational risks.The CCP requires all non-defaulting CMs, who have any open interests or trading volume of the defaulting CM’s portfolio in the last 3 months, to participate in the auction process, unless participation is waived by the CCP at its discretion. Subject to any pre-established conditions and in consultation with non-defaulting CMs, the CCP may invite the clients of non-defaulting CMs to participate in the auction process where it is demonstrated that such participation would contribute to the success of the auction(s). A client is only allowed to participate if it has obtained the approval of its CM. In general, there are two forms of client participation:Direct participation: The client interfaces directly with the CCP to participate in the auction and submits its bids but with authorisation of the client’s CM.Indirect participation: The CCP permits a client to participate in an auction via its CM. In such a case, the client typically receives information on the defaulting CM’s portfolio via its CM and submit bids indirectly to the CCP via its CM.To incentivize competitive bidding, default fund juniorisation will be applied per auction with each participant’s default contributions also allocated per each portfolio. See item 102.4.The CCP shall inform the winners of the auction(s) individually and provide details on procedures to transfer such positions and the corresponding collateral upon completion of which the receiving CM takes full obligation of such positions. In the event that such transfer results in additional Margin requirements, such financial obligations shall be met at the time specified by the CCP.The high-level auction process is as follows:Auction participant pre-approval: The agreement between non-CMs with interest in bidding on the defaulting CM’s portfolio and the CMs clearing the positions which will be awarded to the non-CMs upon successful bidding.Notification: A notice will be sent to potential or known auction participants, providing all timings of the auction and a reminder on the bidding procedures.Portfolio review: The CCP will provide to the approved participants a file in a pre-agreed format containing the auction positions in the auction portfolio, to provide them with sufficient time to price the portfolio.Bidding process: Bids are in USD cash only.Acceptance of winning bid: The CCP will work out the outcome of the auction and make the announcement to the participants.Award booking: To book the awarded portfolios to the winning participants, including payments to and from the relevant CMs with the pre-margin checks.In the event of an unsuccessful auction, the CCP will seek feedback from the participants and work out the reasons for the failure. Some changes can be made by the CCP to increase the likelihood of a successful auction when it reruns, such as by providing more time for the participants to price the portfolio, a different way of splitting the portfolio, inviting additional participants, adjusting the hedging strategy, etc.As a last resort, the CCP may also unilaterally terminate positions of non-defaulting CMs that offset exactly those of the defaulting CM. The CCP may also consider the following options:If there are open positions going into delivery, the clearing house may invoice back such positions to the defaulting CM while simultaneously also invoicing back the equivalent number of positions to other non-defaulting CMs.Partial tear-up: The CCP will perform a partial tear-up on a pro-rata basis across all CMs which have open positions opposite to the defaulting CM’s and use the last settlement prices of all the relevant instruments.Hide noteRule 612 (Default of Clearing Members), Rulebook; Paragraph 10.4 (Default Procedures), Clearing Procedures; Paragraph 4.3 (Defaulted clearing member portfolio analysis), Paragraph 4.4 (Physically deliverable positions nearing maturity/delivery), Paragraph 4.5 (Client’s position porting), Paragraph 4.7 (Auction), Default Management Playbook |
| 100.2 Is the CCP required or permitted to hedge Contracts? | Yes. It is permitted to do so, but not required. See answer 100.1 for more details.Hide noteRule 612 (Default of Clearing Members), Rulebook; Paragraph 10.4 (Default Procedures), Clearing Procedures |
| 100.3 Are non-defaulting CMs required to enter into hedging Contracts with the CCP? | No.Hide noteRule 612 (Default of Clearing Members), Rulebook; Paragraph 10.4 (Default Procedures), Clearing Procedures |
| 100.4 If so, what are the consequences for refusal to enter into such hedging Contracts? | N/A |
| 100.5 Does the CCP have to consult any committees (e.g., a risk committee or a default committee) in making decisions and managing a default process? | Yes. Upon declaration of a default, the CCP shall engage the Risk Advisory Panel (or other such advisory forum or working group established by the CCP for such purpose) to engage and advise on default procedures (as / when appropriate).Hide noteParagraph 10.3.4, Clearing Procedures |
| 101. Publication of CCP default process | |
| 101.1 How, if at all, are these procedures and their outcome publicised? | The Rules do not specifically address whether, and how, the default procedures adopted by the CCP in the event of a Default (and the outcomes thereof) are publicized. The default procedures are set out in the Default Management Playbook provided by the CCP to CMs. Upon the declaration of a default, the CCP shall notify the defaulting CM and issue a regulatory notice to give notice of the default and the commencement of default management procedures. The regulatory notice shall provide the following information:Name of the defaulting CMDate and cause of the defaultReference to additional information (e.g. website, CCP contact)Hide noteParagraph 10.3.1, Clearing Procedures |
| 102. Auction mechanism | |
| 102.1 Does the CCP use an auction mechanism to liquidate the portfolio of the defaulting member? | Yes, the CCP may decide to do so. See item 100.1.Hide noteRule 612 (Default of Clearing Members), Rulebook; Paragraph 10.4.4, Clearing Procedures; Paragraph 4.7 (Auction), Default Management Playbook |
| 102.2 Are non-defaulting CMs required to participate? | Yes. All non-defaulting CMs who have any open interests or trading volume of the defaulting CM’s portfolio in the last 3 months are required to participate in the auction process, unless participation is waived by the CCP at its discretion.Hide noteParagraph 10.4.4, Clearing Procedures; Paragraph 4.7.1 (Auction participation criteria), Default Management Playbook |
| 102.3 If so, to what extent? | Not addressed in the Rules. |
| 102.4 If a CM refuses to participate, what are the consequences for not bidding? | Not addressed in the Rules. However, participating CMs who do not submit any bids or who have submitted bad bids will have their Guaranty Fund Contributions juniorized. After the first layer of the Abaxx Contribution has been fully utilized, the CCP will apply the juniorized Guaranty Fund Contributions first in priority to the Guaranty Fund Contributions of all other non-defaulting CMs.Hide noteParagraph 4.7.4 (Auction juniorization) and Appendix, Default Management Playbook |
| 102.5 Are Clients allowed to participate? | Yes. Subject to any pre-established conditions and in consultation with non-defaulting CMs, the CCP may invite CM customers to participate in the auction process where it is demonstrated that such participation would contribute to the success of the auction(s). A client is only allowed to participate if it has obtained the approval of its CM.Hide noteParagraph 10.4.4, Clearing Procedures; Paragraph 4.7.1 (Auction participation criteria), Default Management Playbook |
| 102.6 If so, what are a CM’s obligations with respect to a bid submitted by a Client? | Not addressed in the Rules. |
| 102.7 Is there a minimum bid size? | Not addressed in the Rules. See item 102.13 below. |
| 102.8 Does the CCP allow CMs to submit bids for part only of an auction portfolio? | Not addressed in the Rules. |
| 102.9 On what basis does the CCP decide the size and composition of the auction portfolio? | The portfolios for auction may be split into smaller portfolios for separate auctions to increase the likelihood of a successful auction. At the discretion of the CCP’s Default Management Team, various criteria will be used for the portfolio split which includes asset class, product types, expiry, currency, and settlement method. In practice, the CCP will aim to have the lowest number of auctions as possible as to minimize operational risks.The Default Management Team will take the common trading strategy of participants into account when splitting the portfolios. To avoid generating directional risk, the Default Management Team will also consider margin offsets and position netting.Hide noteParagraph 4.7.2 (Auction portfolio participation), Default Management Playbook |
| 102.10 Are the house and Client Contracts kept in separate auction portfolios? | Not addressed directly in the Rules, but it appears they would not be separated. We understand from the CCP that the CCP will first attempt to port over Client Contracts to non-defaulting CMs, before any auction is held. |
| 102.11 How would the auction be structured/conducted in respect of multiple auction portfolios? | Not addressed in the Rules. |
| 102.12 What is the consequence if two or more bidders submit the same price for an auction portfolio (e.g., is the auction portfolio allocated on a pro-rata basis, and/or is timeline of price submission used to determine the allocation)? | Not addressed in the Rules. |
| 102.13 Does the CCP retain the power to set minimum bid price thresholds? | Yes. The minimum bid size will be decided by the Default Management Team considering each auction participant’s trading activities in the relevant product or asset class or to the risk exposure of the defaulting CM’s portfolio. For any mandatory auction participation, the Default Management Team will decide on the portfolio coverage of the mandatory bids. The cumulative coverage would ideally be higher than the size of the portfolio which is able to provide a buffer in the event that the submitted bids are not sufficient.Hide noteParagraph 4.7.2 (Auction portfolio participation), Default Management Playbook |
| 102.14 If so, how is this determined and is the minimum bid communicated to auction participants? | See item 102.13. |
| 102.15 Can the CCP reject specific bids or reject the auction entirely? | Not addressed in the Rules. |
| 102.16 If so, under what conditions? | N/A. |
| 102.17 How are “off market” or “non-competitive” bids defined and what are the consequences of submitting “off market” bids? | Not addressed in the Rules. |
| 102.18 How does the CCP deal with a scenario where it does not receive any bids in the auction? | Not addressed in the Rules. See item 100.1 on the actions that the CCP may take in the event of an unsuccessful auction. Hide noteParagraph 4.7.5 (Response to an unsuccessful auction), Default Management Playbook |
| 102.19 How does the CCP determine to whom Contracts are allocated pursuant to the auction and for what price? | Not addressed in the Rules. |
| 102.20 Does the CCP have any obligation to accept a majority percentage of the bids? | Not addressed in the Rules. |
| 103. Utilisation of default process | |
| 103.1 Is the CCP required to utilise the specified default process? | No. While it may use the procedures detailed in item 100.1, the CCP has ultimate discretion in how it addresses a default.Hide noteRule 612 (Default of Clearing Members), Rulebook; Paragraph 10.4 (Default Procedures), Clearing Procedures |
| 104. Outsourcing of the CCP’s CM default process | |
| 104.1 Is the CCP permitted to outsource aspects of the default process? | Yes. The CCP may close-out positions belonging to the defaulting CM and/or its customer(s) through a liquidation process performed by liquidation agents and/or through any appointed CM(s).Hide noteParagraph 10.4.3, Clearing Procedures; Paragraph 4.6 (Closing out position), Default Management Playbook |
| 104.2 If so, under what circumstances? | The CCP may decide to do so depending on the nature of the default, the market characteristics at such time and at the CCP’s sole discretion.Hide noteParagraph 10.4 (Default Procedures), Clearing Procedures; Paragraph 4.6 (Closing out position), Default Management Playbook |
| 104.3 If the CCP is permitted to outsource aspects of the default process, is the CCP’s ability to outsource limited to certain obligations? | No. See item 104.1.Hide noteParagraph 10.4.3, Clearing Procedures |
| 104.4 To whom may the CCP outsource aspects of the default process and what decision-making rights would be outsourced? | The CCP may close-out positions belonging to the defaulting CM and/or its customer(s) through a liquidation process performed by liquidation agents and/or through any appointed CM(s).Hide noteParagraph 10.4.3, Clearing Procedures |
| 104.5 Is any indemnification provided to the CCP if the outsourcing results in a loss? | Yes. The Defaulter, acting for its own account as principal, shall indemnify, hold harmless and be liable to the CCP in respect of all the loss, damage, costs, charges and/or expenses and/or liability of whatsoever nature suffered or incurred (including legal costs on a full indemnity basis) by the CCP arising out of the Defaulter’s conduct (whether such conduct took place prior to or after declaration of the default) or in connection with the default.Hide noteRule 612 (Default of Clearing Members), Rulebook |
| 104.6 Will the CCP remain liable for the performance of its obligations regardless of whether such obligations are outsourced or delegated? | Yes.However, the Rules provide that the CCP shall not be liable to any CM or any third party in respect of any loss, damage, costs, charges and/or expenses and/or liability of whatsoever nature and howsoever arising suffered or incurred by such CM or third party, arising out of or in connection with the declaration or non-declaration of a default by the CCP.In addition, the Defaulter, acting for its own account as principal, shall indemnify, hold harmless and be liable to the CCP in respect of all the loss, damage, costs, charges and/or expenses and/or liability of whatsoever nature suffered or incurred (including legal costs on a full indemnity basis) by the CCP arising out of the Defaulter’s conduct (whether such conduct took place prior to or after declaration of the default) or in connection with the default.Hide noteRule 612 (Default of Clearing Members), Rulebook |
| 105. Outsourcing of CM obligations | |
| 105.1 Is the CM permitted to outsource any of its obligations to an affiliate or a third-party? | Not addressed in the Rules. |
| 105.2 If so, under what circumstances? | N/A. |
| 105.3 Is the CM’s ability to outsource limited to certain obligations? | N/A |
| 105.4 Is any indemnification provided to the CCP by the CM if the outsourcing results in a loss? | N/A |
| 105.5 Will the CM remain liable for the performance of its obligations regardless of whether such obligations are outsourced or delegated? | N/A |
| 106. Forced Allocation | |
| 106.1 Does the CCP have the right to forcibly allocate Client and house Contracts to non-defaulting CMs? | No. The Clearing Procedures provide that the CCP may, in order to re-establish a matched book, transfer positions and the associated collateral of the defaulting CM’s customer(s) to a non-defaulting CM in accordance with any ex-ante arrangements that may already exist for a customer(s) subject to the approval of the CCP and the acceptance of any such CM.Hide noteParagraph 10.4.2, Clearing Procedures |
| 106.2 If so, by what mechanism are pricing, size of allocations and CM recipients determined? | Not addressed in the Rules. |
| 106.3 What is the timing for Forced Allocation? | Not addressed in the Rules. |
| 106.4 Is Client business treated separately from house business? | Not addressed in the Rules. |
| 107. Invoicing Back | |
| 107.1 Does the CCP have the ability to liquidate Contracts on opposite sides of the market through Invoicing Back Contracts with non-defaulting members for purposes of liquidating Contracts or hedging market risks of the defaulting member? | In the event of an unsuccessful auction of the Defaulter’s portfolio, the CCP may consider, as a last resort, invoicing back any open positions which are going into delivery to the Defaulter while simultaneously also invoicing back the equivalent number of positions to other non-defaulting CMs.Further, the Rules provide that in the event of a default, the CCP may take any action it considers appropriate, including closing out all of the Defaulter’s House Account positions, transferring a portion or all of the positions of a Customer of the Defaulter to another CM, and closing out a portion or all of the positions of a Customer Account of the Defaulter. Hide noteRule 612 (Default of Clearing Members), Rulebook; Paragraph 4.7.5 (Response to an unsuccessful auction), Default Management Playbook |
| 107.2 If so, how are the prices for such Contracts determined? | Not addressed in the Rules. |
| 107.3 What is the timing for Invoicing Back? | Not addressed in the Rules. |
| 107.4 Is Client business treated separately from house business? | Not addressed in the Rules. |
| 108. Fire drills | |
| 108.1 Does the CCP conduct mock default “fire drills” to test the resiliency, response time and efficiency of its default management protocols? | Yes.Hide noteRule 614 (Default Management Exercises), Rulebook; Paragraph 10.6 (Default Management Exercise), Clearing Procedures |
| 108.2 If so, what is the frequency of these fire drills? | The fire-drills are conducted annually (or more frequently if market conditions warrant).Hide noteParagraph 10.6 (Default Management Exercise), Clearing Procedures |
| 108.3 Are the results of the fire drills shared with CMs? | Not addressed in the Rules. |
| 109. CCP loss allocation structure/waterfall | |
| 109.1 Please describe the loss allocation structure that the CCP has in place. For each item in the waterfall, please indicate whether utilised resources are repayable if the CCP subsequently recovers losses. | Default by CMThe Default Waterfall is comprised of resources contributed from a defaulting CM, the CCP, and CMs, as well as any additional resources that are made available to manage a default (s) during a Default Period.Without prejudice to the rights of the CCP as otherwise provided in the Rules, upon a default, the CCP shall be entitled, in satisfying the CCP’s obligations, to apply the resources of the Default Waterfall in the following order.Any monies, assets or Collateral held in any account of or in respect of the Defaulter, except where such monies or non-cash collateral relate to any Customer Contract, the application of which shall only be carried out in the event the relevant conditions in Rule 609 of the Rulebook are met.The first layer of Abaxx Contribution (at least 15% of the Guaranty Fund Requirement), which represents the CCP’s mandatory contribution to the Guaranty Fund.The Guaranty Fund Contribution of non-defaulting CMs.The second layer of Abaxx Contribution (at least 10% of the Guaranty Fund Requirement), which represents the CCP’s mandatory contribution to the Guaranty Fund.The Assessment Contribution of non-defaulting CMs.Any other discretionary monies, assets, or additional resources made available to the CCP.Recovery of amounts utilised from non-defaulting CMsIn the event of the CCP applying default management resources in accordance with the Default Waterfall, the CCP will make repayment to the persons whose resources have been applied pro rata in the reverse order of the Default Waterfall in respect of any amounts received from the Defaulter as a result of its being a creditor of the Defaulter in the Defaulter’s insolvency or otherwise (net of the CCP’s costs of managing the recovery of the Loss), but without counting for interest.Hide noteRule 612 (Default of Clearing Members), Rulebook |
| 110. Application of default fund and/or margin across services | |
| 110.1 Can a defaulting CM have its default fund contribution or initial margin provided for one service used to pay for losses in respect of another service? | N/A |
| 110.2 If so, are defaulting CM funds reserved until losses across all of the relevant services are crystallised? | N/A |
| 111. Use of non-defaulting CM initial margin to cover obligations of defaulting CMs | |
| 111.1 Can the CCP use the initial margin of a non-defaulting CM to satisfy the obligations of any other CM upon its default? | No.Hide noteRule 612 (Default of Clearing Members), Rulebook |
| 111.2 If so, please describe how such losses are allocated. | N/A. |
| 111.3 If so, is there a cap on a CM’s liability in respect of its initial margin? | N/A. |
| 111.4 If so, please describe the cap. | N/A. |
| 112. Default fund calculation methodology | |
| 112.1 How does the CCP calculate the funded default fund requirement of a CM (including whether there is any floor and/or cap on the CM’s contribution to the CCP’s default fund), and how frequently does the CCP reset the size of the default fund? | The CCP will determine the total GF size based on a risk-based methodology that considers the potential stress loss in excess of Margin requirements for each CM (referred to as the “stress loss”).The stress loss calculation is performed individually for each CM (at the house unit level and at the customer unit level) based on numerous historical and forward-looking extreme but plausible market scenarios (as determined by the CCP.The stress loss result for each CM is the summation of the stress loss calculation for its house unit and its customer unit. Where the stress loss calculation for the house unit results in a gain, such gain can be applied to reduce the stress loss calculation for the customer unit. However, the opposite is not permissible in that a gain in the customer unit cannot offset a loss in the house unit for purposes of the stress loss result.The minimum GF size will be calculated as the summation of the largest CM stress loss result and that of the two (2) financially weakest CMs (as determined by the CCP) over a period defined by the CCP.The minimum GF Requirement for each CM shall consider its proportionate share of the GF size based on a weighted sum of (1) the average intra-day margin requirements, (2) the average end-of-day margin requirements, and (3) the average stress loss above initial margin over a period defined by the CCP and subject to the required minimum CM GF Contribution of USD500,000.The CCP may decide to increase the total GF size or the GF requirement of any specific CM at its sole discretion.The CCP will determine the GF Requirement for each CM as of the last Trading Day each month (or more frequently if market conditions warrant) and initiate a request for GF for any shortfall.Hide noteRule 611 (Guaranty Fund), Rulebook; Paragraph 6.2 (Guaranty Fund Methodology), Paragraph 6.3 (Guaranty Fund Management), Clearing Procedures |
| 112.2 Please describe the methodology used by the CCP (e.g., Cover 1 or Cover 2) to calculate the size of the default fund and any stress/back testing methodology specified in the Rules. | See item 112.1. The methodology adopted by the CCP (as required by the MAS) appears to be between Cover 1 and Cover 2, as it covers the largest CM stress loss result and that of the two financially weakest CMs (as determined by the CCP) over a period defined by the CCP.Hide noteRule 611 (Guaranty Fund), Rulebook; Paragraph 6.2 (Guaranty Fund Methodology), Clearing Procedures |
| 113. Unilateral changes to default fund methodology | |
| 113.1 Can the CCP unilaterally change the methodology used to calculate the size of the default fund and/or any associated floor and cap? | Yes. The Rules provide for the CCP’s right to:determine the Guaranty Fund Requirement applicable to a CM;review and alter the formula to calculate the Guaranty Fund requirement at its sole discretion; andincrease the total GF size or the GF requirement of any specific CM at its sole discretion.However the CCP, as an approved clearing house, is required to seek the MAS’ approval prior to making any change to its risk management frameworks, including the size of the financial resources available to it to support a default of its CM.Hide noteRule 611 (Guaranty Fund), Rulebook; Paragraph 6.2 (Guaranty Fund Methodology), Clearing Procedures; Regulation 12(1)(a), Securities and Futures (Clearing Facilities) Regulations 2013 |
| 113.2 If so, what is the notice period, if any? | Not specifically addressed in the Rules.However, the CCP will issue a monthly report to CMs setting forth the Guaranty Fund Requirement and each CM’s required Guaranty Fund Contribution. The Guaranty Fund Requirement shall be maintained for the Guaranty Fund Period of one (1) calendar month unless revised by the CCP on an interim basis in an interim report.If at any time such monthly or interim report indicates that the CM’s current Guaranty Fund Contribution is smaller than the amount required, the CM shall increase its contribution within 2 Business Days. If such report indicates that the CM’s current Guaranty Fund Contribution is larger than the amount required, the CM may withdraw the excess amount subject to the CCP’s approval.Hide noteRule 611 (Guaranty Fund), Rulebook |
| 114. Default fund eligible assets | |
| 114.1 What assets may be posted as default fund contributions and how, when and with what notice period can the CCP change the list of eligible assets and any applicable concentration limits? | Eligible assetsThe CCP shall prescribe the types of Collateral and currencies, whether in cash or non-cash, for the purposes of meeting GF requirements. The Collateral types and their eligibility to meet such requirements will be communicated through regulatory notice and publication on the website. No notice period is prescribed in the Rules.Concentration limitsThe concentration limits that apply to each type will be published through regulatory notice and publication on the website. No notice period is prescribed in the Rules.Hide noteRule 610 (Collateral), Rulebook; Paragraph 7.2 (Acceptable Collateral) and Paragraph 7.3 (Collateral Valuation and Concentration Limits), Clearing Procedures |
| 114.2 How are default fund contributions provided (e.g. title transfer, segregated fund or by way of security)? | Cash collateralNot specifically addressed in the Rules, but Guaranty Fund Contributions provided in the form of cash collateral would appear to be provided by way of title transfer. See item 56.1.Non-cash collateralUpon assumption of membership, CMs must grant to the CCP an unencumbered Security Interest over all Collateral of the CCP.As a condition of membership, and subject to penalties, all CMs are required to take all steps, including the execution or ratification of any document, to effect the CCP’s lien over all of the Collateral of the CM. Where the CM intends to deposit or otherwise provide non-cash Collateral to the CCP, it shall execute and deliver a Security Deed in the form and on terms prescribed by the CCP, setting out the terms under which its Collateral are provided to, and held by, the CCP. For the avoidance of doubt, and without prejudice and in addition to any Security Interest or other right or remedy which the CCP may have under the Rules, contract, law, or equity, and subject to any applicable restrictions pursuant to MAS Requirements or imposed by the regulatory authority, the CCP shall have a lien on all Collateral deposited with or provided to the CCP and on any other monies or assets of the CM that may be or become available to the CCP.Hide noteRule 610 (Collateral), Rulebook |
| 114.3 When does the CM contribute its default fund contribution? | CMs that have been admitted to membership of the CCP shall make the required minimum Guaranty Fund Contributions plus such other amount as the CCP, at its discretion, determines is necessary (e.g., based on projected clearing activity). A CM is required to increase its contribution within two (2) Business Days if at any time its current Guaranty Fund Contribution is smaller than the amount required, as specified in the monthly or interim report issued by the CCP: see item 113.2.The Guaranty Fund Contributions by new CMs shall not impact the Guaranty Fund Requirement in effect at the time, unless there is a subsequent recalculation of the Guaranty Fund Requirement during the month.Hide noteRule 611 (Guaranty Fund Contribution), Rulebook |
| 115. Segregation of default fund contributions | |
| 115.1 Are the default fund contributions of CMs held on a segregated basis by the CCP? | Yes, in respect of Collateral held by or otherwise deposited with or provided to the CCP solely in respect of Customer Contracts. Collateral held by or otherwise deposited with or provided to the CCP shall be held on trust by the CCP for the benefit of the relevant Customers of the CM pursuant to MAS Requirements, where such Collateral is held by or otherwise deposited with or provided to the CCP solely in respect of Customer Contracts.The CCP will establish a MSMA, and CSMA at each appointed settlement bank and at each appointed custodian for each approved collateral type. The CCP’s collateral accounts shall hold all collateral received from the corresponding MSMA and CSMA of all CMs.The CCP shall have the right to commingle any or all Collateral held by or otherwise deposited with or provided to it by CMs solely in respect of Customer Contracts, in the same account. For Collateral held by or otherwise deposited with or provided to the CCP for purposes other than the foregoing, the CCP shall have the right to commingle any or all such Collateral in the same account.Hide noteRule 610 (Collateral), Rulebook; Paragraph 3.1 (ACS Position Accounts), Paragraph 3.3.4, Clearing Procedures; Regulation 23, Securities and Futures (Clearing Facilities) Regulations 2013 |
| 116. Segregation of financial resources across services | |
| 116.1 If the CCP clears different Products through more than one service within the same legal entity, are the financial resources available in respect of one service segregated from those of any other service (e.g., securities, futures, CDS, etc.)? | N/A. |
| 117. Replenishments | |
| 117.1 Is there a cap on the amount of replenishment the CCP may require from non-defaulting CMs in respect of a single default? | Yes.Hide noteRule 612 (Default of Clearing Members), Rulebook; Paragraph 10.5.4, Clearing Procedures |
| 117.2 If so, please describe the cap. | In the event that resources of the Default Waterfall have been utilized to manage the default(s), the CCP may recalculate the Guaranty Fund Requirement and require CMs to replenish their contributions, however any such contributions shall not be utilized for any default(s) occurring in the current or any prior Default Period.Hide noteRule 612 (Default of Clearing Members), Rulebook; Paragraph 10.5.4, Clearing Procedures |
| 117.3 Is there a cap on the amount of replenishment the CCP may require from non-defaulting CMs in respect of multiple defaults? | Yes.Hide noteRule 612 (Default of Clearing Members), Rulebook; Paragraph 10.5.4, Clearing Procedures |
| 117.4 If so, please describe the cap. | Replenishments by non-defaulting CMs shall not be utilized for any default(s) occurring in the current or any prior Default Period. See item 117.2.Hide noteRule 612 (Default of Clearing Members), Rulebook; Paragraph 10.5.4, Clearing Procedures |
| 117.5 By when is the default fund required to be replenished by the CM, following utilisation? | The GF Requirements of each CM must be met within 2 Business Days from the request for GF made by the CCP.Hide noteParagraph 8.1.3, Clearing Procedures |
| 117.6 Can the CCP use replenished default fund resources to meet losses incurred on account of past default or a default that caused utilisation of the default fund? | No. Replenished default fund resources shall not be utilized for any default(s) occurring in the current or any prior Default Period.Hide noteRule 612 (Default of Clearing Members), Rulebook; Paragraph 10.5.4, Clearing Procedures |
| 118. Assessments | |
| 118.1 Is there a cap on the amount of assessment the CCP may require from non-defaulting CMs in respect of a single default? | Yes.Hide noteRule 612 (Default of Clearing Members), Rulebook; Paragraph 10.5.2, Clearing Procedures |
| 118.2 If so, please describe the cap. | The CCP may require CMs to contribute additional resources where the Losses related to a Defaulter exceed or are likely to exceed funded resources of the Default Waterfall. The Assessment Amount in any Default Period shall be no greater than the amount equal to twice the required Guaranty Fund Contributions of a CM immediately prior to the relevant declaration of a Defaulter (less Guaranty Fund Contributions of a Defaulter(s)) (i.e. at the time of the first default within a Default Period).In the event that the required Assessment Amount is not met (e.g., non-payment, additional default(s)), unless the CCP directs otherwise in a regulatory notice, the CCP shall recalculate the Assessment Amount and require additional Assessment Contributions, subject to the stated maximum Assessment Amount for a given Default Period.Hide noteRule 612 (Default of Clearing Members), Rulebook; Paragraph 10.5.2, Clearing Procedures |
| 118.3 Is there a cap on the amount of assessment the CCP may require from non-defaulting CMs in respect of multiple defaults? | Yes.Hide noteRule 612 (Default of Clearing Members), Rulebook; Paragraph 10.5.2, Paragraph 10.5.3, Clearing Procedures |
| 118.4 If so, please describe the cap. | The Assessment Amount would be capped at the maximum amount applicable for each Default Period – see item 118.2.The Default Period commences upon declaration of a default and shall define the default resources available to manage the default including any additional default(s) that may occur within a 5 day period. In the event that an additional CM(s) defaults within the 5 day period, it shall extend the Default Period (including the availability of default resources defined at the first default within the Default Period) for another 5 days until such time that the Default Period expires.Hide noteRule 612 (Default of Clearing Members), Rulebook; Paragraph 10.5.2, Paragraph 10.5.3, Clearing Procedures |
| 118.5 By when is the CM required to provide its assessment? | CMs must make the required Assessment Contribution within 2 Business Days upon receipt of the regulatory notice issued by the CCP.Hide noteRule 612 (Default of Clearing Members), Rulebook |
| 119. CMs’ ability to cap default fund liability | |
| 119.1 Are CMs required to terminate their CCP membership to cap their default fund liability? | No, not in the context of a single Default Period. However, where successive Default Periods occur, the caps applicable to a CM in relation to Assessment Contributions and replenishment will be reset for each Default Period. CMs whose resignation has been approved by the CCP shall remain liable to contribute towards any default or additional assessment arising therefrom until the Withdrawal Effective Date.See items 75-77 for the liabilities of a withdrawing CM, item 117 for a CM’s replenishment obligations and item 118 for a CM’s assessment obligations.Hide noteRule 612 (Default of Clearing Members), Rulebook |
| 120. CCP contributions to the default fund/waterfall | |
| 120.1 Does the CCP contribute to the default fund or otherwise to the default waterfall? | Yes. See items 109 and 120.2.Hide noteRule 612 (Default of Clearing Members), Rulebook; Paragraph 10.5.2, Clearing Procedures |
| 120.2 If the CCP contributes to the default fund or otherwise to the default waterfall, how much does it contribute and is there a cap? | The CCP will make a contribution of at least 25% of the Guaranty Fund Requirement, which is allocated across two different layers in the Default Waterfall, which are sized at 15% of the total GF size and 10% of the total GF size respectively. No cap is prescribed in the Rules.Hide noteRule 612 (Default of Clearing Members), Rulebook; Paragraph 10.5.2, Clearing Procedures |
| 120.3 If there is a cap, please describe it. | N/A. |
| 120.4 When does it provide and replenish such contribution? | Not specifically addressed in the Rules. |
| 121.Treatment of CCP default fund/waterfall contributions | |
| 121.1 Are such contributions separately identified on the balance sheet and, if so, are these funds held in a segregated account away from the other assets of the CCP? | The CCP shall have the right to commingle any or all Collateral held by or otherwise deposited with or provided to it by CMs solely in respect of Customer Contracts, in the same account. For Collateral held by or otherwise deposited with or provided to the CCP for purposes other than the foregoing, the CCP shall have the right to commingle any or all such Collateral in the same account.However, in order to calculate the proper disbursement of resources in accordance with the waterfall sequence triggered by a CM default (see item 109.1), it can be presumed that the CCP would keep a balance sheet that tracks contributions by size and source.Hide noteRule 610 (Collateral), Rulebook; Paragraph 3.3 (Collateral Settlement and Margin Accounts), Clearing Procedures |
| 122. Recourse to CCP assets in a default situation and any linked recourse | |
| 122.1 What recourse is there to the CCP’s assets (i.e., other than those submitted to the default fund) in a default situation? | Following a CM default, recourse to the CCP’s assets is limited to the CCP’s contribution as described in item 120. If any amount paid out of the default fund is recovered in whole or part, it is then paid back in reverse order of sequence (i.e. source six then five, four then three, and so on, per item 109.1). The default fund also includes any other discretionary monies, assets or additional resources made available to the CCP, which may include monies, assets or resources that are contributed by the CCP from its own assets.Hide noteRule 612 (Default of Clearing Members), Rulebook |
| 122.2 Are these assets subject to non-recourse or other ring-fencing provisions? | See item 122.1. |
| 123. Default resources for CCP link arrangements | |
| 123.1 Are there separate default resources for any interoperability/link arrangements that the CCP has in place with other CCPs? | N/A. |
| 124. CCP disclosure of Rules | |
| 124.1 How, if at all, does the CCP disclose the Rules (including any changes to the Rules) to the public? | The CCP makes the latest version of its Rules publicly available on its website at: https://www.abaxx.exchange/The CCP announces any amendment to the Rules through a regulatory notice, and such amendment shall take effect at such time and in such manner as the CCP may determine, subject to applicable law. The CCP is required to adhere to the rule amendment requirements prescribed under the SFA – see item 79.1.Also, the CCP will communicate any revisions to the Clearing Procedures through Circular and publication on its website.Hide noteRegulation 30, Securities and Futures (Clearing Facilities) Regulations 2013; Rule 309 (Rule Amendments), Rulebook; Section 1 (General), Clearing Procedures |
| 125. CCP disclosure of fees | |
| 125.1 How, if at all, does the CCP publicly disclose its fees at the level of its individual service and policies on any available discount? | Not specifically addressed in the Rules. The CCP is required to make available to any person upon his request, or publish in a manner that is accessible, information on the applicable fees and charges of the CCP.Hide noteRegulation 18(c), Securities and Futures (Clearing Facilities) Regulations 2013 |
| 126. CCP notification of service/fee changes | |
| 126.1 How, if at all, does the CCP notify its CMs and the public of changes to services and fees? | Not specifically addressed in the Rules. |
| 127. CCP disclosure of technology/communication procedures | |
| 127.1 How, if at all, does the CCP disclose information on its technology and communication procedures in respect of the Service? | Not specifically addressed in the Rules. Basic information on the access and connectivity of the CCP’s clearing system is made available in the Clearing Procedures. We understand from the CCP that it will publish additional information on its technology and communication procedures on its website.Hide noteParagraph 2.1 (System Access), Paragraph 2.2 (System Connectivity), Clearing Procedures |
| 128. CCP completion and disclosure of the CPSS-IOSCO Disclosure framework for financial market infrastructures | |
| 128.1 Does the CCP complete the CPSS-IOSCO Disclosure framework for financial market infrastructures? | We understand from the CCP that it intends to publish its report on the CPSS-IOSCO Disclosure framework after it begins operations. The report will be made available on its website. |
| 128.2 If so, when was it last completed and how frequently is it updated? | N/A. |
| 128.3 How, if at all, does the CCP disclose its responses to the CPSS-IOSCO Disclosure framework for financial market infrastructures to the public? | N/A. |
| 128.4 Does the CCP complete or follow the CPMI-IOSCO Public quantitative disclosure standards for central counterparties? | N/A. |
| 128.5 If so, when was it last completed and how frequently is it updated? | N/A. |
| 128.6 How, if at all, does the CCP disclose its responses to the CPMI-IOSCO Public quantitative disclosure standards for central counterparties to the public? | N/A. |
| 129. CCP completion and disclosure of the Federal Reserve Bank of New York’s Payments Risk Committee Recommendations for Supporting Participant Due Diligence of Central Counterparties | |
| 129.1 Does the CCP complete or follow the Federal Reserve Bank of New York’s Payments Risk Committee Recommendations for Supporting Participant Due Diligence of Central Counterparties? | No. |
| 129.2 If so, when was it last completed and how frequently is it updated? | N/A. |
| 129.3 How, if at all, does the CCP disclose its responses to Federal Reserve Bank of New York’s Payments Risk Committee Recommendations for Supporting Participant Due Diligence of Central Counterparties to the public? | N/A. |
| 130. CCP risk disclosure document | |
| 130.1 Does the CCP provide a risk disclosure document regarding the services and account structures it provides? | No. |
| 131. CCP hypothetical capital | |
| 131.1 Does the CCP disclose its hypothetical capital? | No. |
| 131.2 If so, how does the CCP disclose its hypothetical capital? | N/A. |
| 131.3 Can CMs share the CCP’s hypothetical capital with their Clients? | N/A. |
| 132. CM access to CCP audit reports and/or conclusions | |
| 132.1 What, if any, access do CMs have to external/internal audit reports and/or conclusions? | Not addressed in the Rules. |
| 133. Unforeseen/uncovered liquidity shortfalls | |
| 133.1 How do the Rules address unforeseen and potentially uncovered liquidity shortfalls? | The CCP has broad powers to call for additional collateral at any time. The CCP may, either intra-day or end of day, impose, amend or withdraw initial margin, variation margin, delivery margin and/or additional margin requirements in respect of any CM at any time and at its discretion.In the event of a Financial Emergency or an impending Financial Emergency, the CCP, or any committee thereof, may, inter alia, make an additional Margin call or order any CM to deposit additional funds. The CCP also has broad powers to do the same if it determines that an emergency situation (including, but not limited to, any declaration of a Force Majeure Event) exists in which the fair and orderly market in a Commodity is likely to be disrupted, or the financial integrity of the CCP is threatened, or the normal functioning of the CCP has been or is likely to be disrupted.See items 44.3 and 53.1 for more information on CCP requests for additional collateral from CMs.Hide noteRule 202 (Financial Requirements and Financial Emergencies), Rule 306 (Board’s Powers in Emergencies), Rule 609 (Margin and Segregated Accounts), Rulebook |
| 134. Liquidity facilities available to the CCP | |
| 134.1 Does the CCP have access to any liquidity facilities? | Not addressed in the Rules. |
| 134.2 If so, please describe them generally (including the methodology used by the CCP to determine the amount of its required liquidity resources (e.g., Cover 1 or Cover 2)). | N/A. |
| 135. CM requirements to provide liquidity facilities in respect of non-cash collateral | |
| 135.1 Must a CM provide a liquidity facility to help the CCP manage its liquidity risk for non-cash collateral? | No. |
| 135.2 If so, please describe the requirement. | N/A. |
| 136. Circumstances under which liquidity facilities can be drawn | |
| 136.1 Under what circumstances can these facilities be drawn? | N/A. |
| 137. Replenishment of liquidity resources | |
| 137.1 How do the CCP’s rules allow for the replenishment of any liquidity resources during a stress event? | Not addressed in the Rules. See items 117 and 118 in relation to assessment to, and replenishments of, the default fund. |
| 138. CCP events of default | |
| 138.1 What constitutes an “event of default” by the CCP? (including any grace periods)? Please list all possible options that may constitute an event of default. | The below constitute an “event of default” by the CCP under the Rules.Failure to pay or deliverYes. The CCP fails to make a payment to a CM for a period of 30 calendar days from the date the obligation to pay under a Contract fell due.Voluntary insolvency proceedingsYes. The CCP institutes a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or presents a petition for its winding up or liquidation.Involuntary insolvency proceedingsYes. The CCP has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding up or liquidation, and such proceeding or petition results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for the CCP’s winding-up or liquidation.Corporate actionYes. The CCP approves resolutions authorizing any proceeding or petition described above.Hide noteRule 613 (Default of the Clearing House), Rulebook |
| 139. Procedural requirements/regulatory approvals required for CCP default | |
| 139.1 Are there any procedural requirements or regulatory approvals required to trigger a default of the CCP? | No. If at any time the events described in item 138.1 under the headers “Voluntary insolvency proceedings”, “Involuntary insolvency proceedings” or “Corporate action” occur, all positions in the CCP shall be closed promptly.However, where the CCP fails to make a payment to a CM for a period of 30 calendar days from the date the obligation to pay under a Contract fell due, a CM is required to give notice in writing to the CCP specifying a date for the termination and liquidation of all Contracts to which it is a party. Hide noteRule 613 (Default of the Clearing House), Rulebook |
| 140. Determination, notification and processes in respect of the CCP’s default | |
| 140.1 How is a declaration of CCP default communicated to the CMs, Clients and to the public? | Not addressed in the Rules. |
| 140.2 Who is responsible for determining the CCP’s default? | Not addressed in the Rules. |
| 140.3 How are shortfalls/excesses dealt with following termination of all Contracts as a result of a CCP “event of default”? | Not addressed in the Rules. Standard principles of insolvency law should apply. |
| 140.4 Provide the citation of the principal statute that would govern the CCP’s insolvency. | Insolvency, Restructuring and Dissolution Act 2018 and Part 7 of the Companies Act. |
| 141. Use of non-defaulting CM’s initial margin to cover losses of CCP upon its default | |
| 141.1 Can the CCP use the initial margin of a non-defaulting CM to satisfy losses of the CCP upon its default? | No. Initial margin of a CM can only be used to satisfy payment obligations that such CM owes in respect of its terminated Contracts.Hide noteChapter 1 (Definitions), Rulebook |
| 141.2 If yes, please describe how such losses are allocated. | N/A. |
| 141.3 Is there a cap on a CM’s liability for losses of the CCP upon its default? | No. |
| 141.4 If so, please describe the cap. | N/A. |
| 142. CM declaration of CCP default | |
| 142.1 If a default is called against the CCP by a CM, does that apply solely to the CM concerned or to all CMs? | A default is not “called against a CCP by a CM”, but if a CM elects to terminate and liquidate all Contracts held under the CCP while that default continues, that termination action only applies to that particular CM.Hide noteRule 613 (Default of the Clearing House), Rulebook |
| 143. Impact of CCP default on existing CM default processes | |
| 143.1 How does a CCP default affect any ongoing CM default processes with respect to both the applicable defaulting CM and the non-defaulting CMs? | Not specifically addressed in the rules.However, the right to terminate and liquidate all Contracts held under the CCP, where the CCP fails to make a payment to a CM for a period of 30 calendar days from the date the obligation to pay under a Contract fell due, rests with non-defaulting CMs only, but not a defaulting CM. See item 139. Hide noteRule 613 (Default of the Clearing House), Rulebook |
| 144. Netting and set-off upon a CCP default | |
| 144.1 Do the Rules provide for the netting and set-off of obligations, including obligations to return collateral and default fund contributions upon the default of the CCP, including in the context of an insolvency of the CCP? | Where the CCP fails to make a payment to a CM for a period of 30 calendar days from the date the obligation to pay under a Contract fell due, a CM has the right to give notice in writing to the CCP specifying a date (the “Termination Date”) for the termination and liquidation of all Contracts to which it is a party. In the event a CM exercises this right, the CCP may, in its absolute discretion and by notice in writing, take any steps necessary to terminate any related positions or close out any related positions held with any other CMs, notwithstanding that such CMs are not in default of any of their obligations (hereafter, such other CMs, together with the CM which exercised its aforementioned rights, shall be collectively referred to as the “Terminating Clearing Member(s)”). Upon the specification of a Termination Date or the CCP exercising its powers of termination and close-out:all rights and obligations of the CCP and the relevant Terminating Clearing Member in respect of any Contract between them are discharged and replaced by an obligation to pay the Termination Amounts;the CCP shall (on, or as soon as reasonably practicable after, the Termination Date or the CCP exercising its powers under the Rules to terminate any related position (as the case may be)) determine the relevant Terminating Clearing Member’s total loss or total gain (as the case may be) in respect of each Contract;the CCP shall treat each gain to the relevant Terminating Clearing Member as a positive amount and each loss by the relevant Terminating Clearing Member as a negative amount and shall aggregate all of such amounts to produce a single, net positive or negative amount (the “Termination Amount”); andwhere a Terminating Clearing Member has a House Account and one or more Customer Accounts:the CCP shall determine 2 net amounts: a net amount in respect of gains and losses arising on Contracts registered in the Terminating Clearing Member’s Customer Account (or all of the Customer Accounts as combined) and a second net amount in respect of gains and losses arising on all other Contracts; andthe 2 net amounts above shall each constitute Termination Amounts.If a Termination Amount is a positive amount, the CCP shall pay it to the relevant Terminating Clearing Member and if any such Termination Amount is a negative amount, the relevant Terminating Clearing Member shall pay it to the CCP. The CCP shall notify the relevant Terminating Clearing Member of each such Termination Amount, and by which party it is payable, as soon as practicable after the calculation thereof. If a Termination Amount is a negative amount, the relevant Terminating Clearing Member shall pay such amount to the CCP, failing which, the CCP may, to the fullest extent permissible under MAS Requirements, sell, realise, apply and set off Collateral or other assets deposited with the CCP by the relevant Terminating Clearing Member in respect of Contracts terminated under Rule 613 of the Rulebook and apply the proceeds against such Termination Amount, without being required to give notice to or obtain the consent of the relevant Terminating Clearing Member or any court order, with full power to execute any documents in its own name or as attorney for the relevant Terminating Clearing Member for that purpose. A Termination Amount shall be paid in US Dollars by the close of business on the Business Day following notification.Without prejudice and in addition to any other rights which the CCP may have (whether by operation of law, contract or otherwise, including under the Rules), any and all Termination Amounts payable by the CCP to the relevant Terminating Clearing Member (or by the relevant Terminating Clearing Member to the CCP) may, at the option of the CCP (and without prior notice to the relevant Terminating Clearing Member), be reduced by its set-off against any and all other amounts (“Other Amounts”) payable by the relevant Terminating Clearing Member to the CCP (or by the CCP to the relevant Terminating Clearing Member) (whether or not arising under the Rules, matured or contingent and irrespective of the currency, place of payment or place of booking of the obligation). To the extent that any of the foregoing amounts are so set off, those amounts will be discharged promptly and in all respects. The CCP will give notice to the relevant Terminating Clearing Member of any set-off effected under Rule 613 of the Rulebook. For the purposes of any calculation or set-off under Rule 613 of the Rulebook, the CCP may convert amounts denominated in any other currency into US Dollars at such exchange rate prevailing at the time of the calculation as it shall reasonably select.Hide noteRule 613 (Default of the Clearing House), Rulebook |
| 145. Determination of close-out value of outstanding Contracts | |
| 145.1 How, when and by whom is the close-out value for outstanding Contracts determined? | The CCP determines the close-out value of the terminated Contracts. The CCP is required to make such determination on, or as soon as reasonably practicable after, the Termination Date or the CCP exercising its powers under the Rules to terminate any related position.Hide noteRule 613 (Default of the Clearing House), Rulebook |
| 146. Netting and set-off across services | |
| 146.1 If the CCP offers more than one clearing service, do the Rules provide for the netting and set-off of amounts owed in respect of one service against amounts due in respect of another service? | N/A. |
| 147. CM rights to terminate Contracts | |
| 147.1 Does the CM have the right to terminate all its Contracts at its discretion, or does the CCP have the right to compel a CM to complete Contracts after a CCP “event of default”? | The relevant CM has the right (but not the obligation) to terminate and liquidate all its Contracts on the occurrence of a CCP event of default (see item 139) which is continuing. The CCP does not have the right to compel a CM to complete transactions during or after an event of default.Hide noteRule 613 (Default of the Clearing House), Rulebook |
| 148. Exhaustion of financial resources of CCP | |
| 148.1 Upon the exhaustion of the CCP’s financial resources, would the CCP become insolvent, would a CM or the CCP itself have the right to terminate all Contracts for that service, would the CCP institute variation margin haircutting, or is there some other outcome? | Complete exhaustion of the CCP’s financial resources is not explicitly addressed in the Rules. The CCP can be wound up under Singapore’s standard winding-up rules, or placed into judicial management or enter into a scheme of arrangement.Hide noteInsolvency, Restructuring and Dissolution Act 2018; Part 7 of the Companies Act |
| 149. CCP recovery and resolution | |
| 149.1 Are there provisions in the Rules describing the CCP’s recovery or resolution (e.g., are there any provisions for the recapitalisation or reestablishment of its services after a default has been resolved)? | With respect to the Rulebook, no, not within the circumstance of a CCP default, only a CM default. However, the MAS has powers to carry out resolution, including to enforce outstanding contractual obligations, return the CCP to a matched book where losses arise from a CM default, continue to temporarily operate the CCP, and transfer critical functions to a third party.Hide notePart 3, Division 5, SFA; Part 4B, Monetary Authority of Singapore Act 1970 or (after the repeal of Part 4B of the Monetary Authority of Singapore Act 1970) Part 8, Financial Services and Markets Act 2022 |
| 150. Limited recourse and segregation across services | |
| 150.1 If the CCP has more than one service, are there limited recourse and segregation provisions between the services? | N/A. |
| 151. Renewal default fund after CCP default | |
| 151.1 Does the CCP have rules with respect to the creation of a new default fund after the occurrence of a CCP default? | No. The default fund’s express purpose is to cover CM defaults only. Hide noteRule 612 (Default of Clearing Members), Rulebook |
| 151.2 If so, what are they? | N/A. |
| 152. Link arrangements with other CCPs | |
| 152.1 Does the CCP have any link arrangements with another CCP (either directly or through an intermediary)? | No. |
| 152.2 If the CCP has any link arrangements with another CCP, do the Rules require the CCP to monitor the risks associated with these link arrangements? | N/A. |
| 152.3 If so, how is such risk monitored? | N/A. |
| 153. Permitted investments of CM cash collateral and default fund contributions by the CCP | |
| 153.1 Do the Rules permit the CCP to invest CM cash collateral and default fund contributions? | Yes. Hide noteRule 610 (Collateral), Rulebook |
| 153.2 If so, what investments are permissible? | The CCP may invest, manage, and use Collateral in such manner as it shall deem fit, provided that:Collateral in respect of Customer Contracts only be invested in accordance with the Rules and MAS Requirements. The legislation permits the CCP, with the prior approval of the MAS, to invest such Collateral in government debentures, negotiable certificates of deposit and money market funds.The CCP shall not use any Collateral received and notified to it as Collateral in respect of a Customer Contract to settle any obligations that are incurred in relation to a Contract entered into for the account of the CM, except in accordance with the Rules and MAS Requirements.Hide noteRule 610 (Collateral), Rulebook; Regulation 25, Securities and Futures (Clearing Facilities) Regulations 2013 |
| 154. Concentration limits and other requirements in respect of the CCP’s investment of CM cash collateral and default fund contributions | |
| 154.1 Are there any concentration limits, minimum criteria or diversification requirements, or other restrictions on how the CCP can invest CM cash collateral and default fund contributions? | Not specifically addressed in the Rules. The Rules provide that the CCP may invest, manage, and use Collateral in such manner as it shall deem fit. Please refer to item 153.2 on the investment of Collateral in respect of Customer Contracts.However, we understand from the CCP that it has counterparty concentration limits that restrict it from placing all Collateral held by it with a single settlement bank or custodian.Hide noteRule 610 (Collateral), Rulebook; Regulation 25, Securities and Futures (Clearing Facilities) Regulations 2013 |
| 155. CCP rights to delegate cash management services | |
| 155.1 Does the CCP have the right to delegate cash management services? | Not addressed in the Rules. |
| 156. Rehypothecation rights | |
| 156.1 Does the CCP have the right to re-pledge, rehypothecate, transfer or use CM non-cash collateral (including both margin and default fund contributions) under its rules? | The CCP may invest, manage, and use Collateral in such manner as it shall deem fit, provided that Collateral in respect of Customer Contracts only be invested in accordance with the Rules and MAS Requirements. Please refer to item 153.2 on the investment of Collateral in respect of Customer Contracts.Also, the CCP may at any time and from time to time sell, substitute, set off, transfer, assign, mortgage, pledge, repledge or otherwise create or grant a lien, interest, charge or other Security Interest on Guaranty Fund Contributions or use them as collateral by way of title transfer arrangement. Any borrowings using the Guaranty Fund Contributions as collateral shall be on terms and conditions deemed necessary or advisable by the CCP in its sole discretion, and may be in amounts greater, and extend for periods of time longer, than the obligations, if any, of any CM to the CCP for which such cash, non-cash collateral or other property was transferred to or deposited with the CCP.Hide noteRegulation 25, Securities and Futures (Clearing Facility) Regulations 2013; Rule 610 (Collateral), Rule 611 (Guaranty Fund), Rulebook |
| 156.2 If so, are there any restrictions on this ability? | Yes, Collateral in respect of Customer Contracts only be invested in accordance with the Rules and MAS Requirements. Under regulation 25 of the Securities and Futures (Clearing Facility) Regulations 2013, the CCP is permitted to (with MAS approval) invest money or assets in relation to Customer Contracts in government debentures, negotiable certificates of deposit and money market funds. There are no equivalent restrictions in respect of collateral for House Contracts.In respect of any borrowings using the Guaranty Fund Contributions as collateral, any amounts so borrowed shall be used and applied by the CCP solely for the purpose of the Guaranty Fund; provided that the failure of the CCP to comply with Rule 611 of the Rulebook in respect of any borrowings, facility or agreement shall not impair any of the rights or remedies of any transferee, assignee, mortgagee, pledgee, collateral taker or holder of any lien or Security Interest.Hide noteRegulation 25, Securities and Futures (Clearing Facility) Regulations 2013; Rule 610 (Collateral), Rule 611 (Guaranty Fund), Rulebook |
| 156.3 Is such investment/rehypothecation made in the name of the CCP or CM? | Not specifically addressed in the Rules. |
| 157. CCP requirements in respect of investment/rehypothecation proceeds | |
| 157.1 Is the CCP required to hold the existing proceeds in a manner consistent with other collateral? | No. The Rules provide that, unless otherwise provided for in the Rules, or unless otherwise required by MAS Requirements, the CCP shall have no obligation to make payment of any fees, interest and investment earnings arising from or in connection with the Collateral to any person.Each CM is also required to secure contractual waivers in favour of the CM from its Customers waiving their respective rights to all interest and investment earnings from the Collateral held with or otherwise provided to the CCP in respect of Customer Contracts, as may be necessary to give effect to the CCP’s rights in relation to interest and fees under Rule 610 of the Rulebook.Hide noteRule 610 (Collateral), Rulebook |
| 158. CCP investment policy | |
| 158.1 Does the CCP have a formal investment policy? | None that is publicly available. |
| 158.2 If so, what is the nature, tenor and risk profile of instruments in which investments can be made? | N/A. |
| 158.3 Is the policy publicly available? | N/A. |
| 158.4 Are exceptions to the investment policy permissible? | N/A. |
| 158.5 If they are, describe the approval process for granting exceptions to specific investments or policy more generally. | N/A. |
| 158.6 Are there any concentration limits, minimum criteria or diversification requirements applied to counterparties with whom the CCP might enter into repos? | Not addressed in the Rules. |
| 158.7 If so, what are they? | N/A. |
| 159. Settlement banks and custodians | |
| 159.1 What entity holds cash (i.e., name of settlement bank) and securities (i.e., name of sub-custodian) collateral belonging to Client accounts and house accounts? | Not addressed in the Rules. |
| 160. Settlement bank/custodian segregation of assets | |
| 160.1 Is collateral (cash and securities) provided to the CCP segregated from the assets of the entity (settlement bank) holding the collateral? | Not addressed in the Rules. We understand that cash Collateral (which is provided to the CCP by way of title transfer) is held by the CCP in bank accounts with each appointed settlement bank in the CCP’s own name. |
| 161. CCP cash collateral accounts | |
| 161.1 In what type of account is the CCP required to hold cash collateral? | The CCP holds cash collateral in a MSMA and CSMA at each appointed settlement bank, which holds all collateral received from the corresponding MSMA and CSMA of all CMs.Hide noteParagraph 3.3.4, Clearing Procedures |
| 162. Liability in respect of cash collateral held at a settlement bank | |
| 162.1 Who bears the risk associated with cash collateral held at a settlement bank (i.e., if the bank holding cash collateral fails, who is responsible)? | Not specifically addressed in the Rules.However, the CM has the complete discretion to call on further Collateral for a CM’s Margin Account.Also, in the event of a Financial Emergency or an impending Financial Emergency (which may include the failure of a settlement bank), the CCP, or any committee thereof, may make an additional Margin call or order any Member to deposit additional funds or impose such additional financial requirements on any CM as the Exchange or the CCP thinks necessary or desirable.Hide noteRule 202 (Financial Requirements and Financial Emergencies), Rule 609 (Margin and Segregated Accounts), Rulebook |
| 163. CCP disclosure of risk allocation arrangements with custodians and banks | |
| 163.1 Does the CCP disclose what risk allocation arrangements it has with third parties holding cash or non-cash collateral on behalf of the CCP? | No. |
| 163.2 If so, how is that disclosed? | N/A. |
| 164. Claims on CM collateral held by custodians | |
| 164.1 Are custodians holding a CM’s collateral required to acknowledge to the CCP that the collateral in custody is not subject to any right, charge, security interest, lien or claim of any kind in favour of the custodian or any person claiming through the custodian (other than in respect of custodial fees relating to the relevant securities and cash account held by the CCP on behalf of the CMs)? | Not addressed in the Rules. |
| 165. Name under which collateral and investments are held | |
| 165.1 In whose name are the collateral and investments held (i.e., the name of the CCP or the name of the CM)? | Collateral is held in the name of the CCP in collateral accounts held with the appointed settlement bank(s) and the appointed custodian(s). However, Collateral which is held by or otherwise deposited with or provided to the CCP solely in respect of Customer Contracts is held on trust by the CCP for the benefit of the relevant Customers of the CM pursuant to MAS Requirements.Hide noteRule 610 (Collateral), Rulebook |
| 165.2 If investments are through an omnibus structure in the name of the CCP, does the CCP maintain records that indicate the underlying CM and/or Client whose collateral has been invested/pledged? | Not addressed in the Rules. |
| 166. Allocation of investment profits/losses in respect of collateral | |
| 166.1 Are investment profits/losses in respect of collateral borne by the CCP or are they distributed back to CMs? | Investment profits are retained by the CCP. Each CM is required to secure contractual waivers in favour of the CM from its Customers waiving their respective rights to all interest and investment earnings from the Collateral held with or otherwise provided to the CCP in respect of Customer Contracts, as may be necessary to give effect to the CCP’s rights in relation to interest and fees under Rule 610 of the Rulebook.The Rules do not specifically address whether losses in respect of collateral are borne by the CCP.Hide noteRule 610 (Collateral), Rulebook |
| 166.2 If distributed to CMs, what is the basis of distributing profits/losses? | N/A. |
| Global Glossary of Terms and CCP Specific Glossary of Terms | Abaxx – GLOBAL GLOSSARY – 03.31.24 |
| Monthly updates spreadsheet | |
| Archive – yearly blacklines | |
| Archive spreadsheet | |
| Diagrams |
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