Singapore Exchange (SGX)

[CityFarmer]

Not in financial industry, so not sure the impact on ACUs and the ADM?

SGX sees big prospects in Asian FX futures business

SINGAPORE – Having just announced its best quarterly financial performance in five years and a second quarter of record volumes in its derivatives business, the Singapore Exchange (SGX) hopes geographic advantages will help make a success of its new menu of Asian currency futures later this year.

The exchange will be offering futures in the Indian rupee, Singapore dollar, Australian dollar and the Aussie-Japanese yen cross in the third quarter of 2013.

http://www.todayonline.com/business/sgx-...s-business

[a74henry]

Good...SGX is thinking of more sources of income. If all goes well, we should see SGX price move up from here unless a downturn occur.

(Vested)

[CityFarmer]

HKEX is working hard to boost its commodities business, while SGX is struggling to achieve a reasonable commodity product offerings in its exchange...

HKEX eyes China co-listings to boost commodities business

SINGAPORE – Hong Kong Exchanges and Clearing is considering joint listings of commodities products on mainland Chinese bourses to capitalise on last year’s acquisition of the London Metal Exchange, Chief Executive Charles Li said on Monday.

“This is about developing mutual product listing/licensing arrangements and forming strategic partnerships with leading exchanges,” said Mr Li in a blog post outlining developments for the exchange’s commodities business.

http://www.todayonline.com/business/hkex...s-business

[Greenrookie]

Anyone knows how if SGX has to bear the counter party risk in the derivatives market if the customers default? For normal shares trading, if the buyer default who is responsible for the shortfall after force sell? I know they can go after the buyer, but in the meantime, is it the brokerage house or sgx that bear the risk?

[fat al]

Anyone knows how if SGX has to bear the counter party risk in the derivatives market if the customers default? For normal shares trading, if the buyer default who is responsible for the shortfall after force sell? I know they can go after the buyer, but in the meantime, is it the brokerage house or sgx that bear the risk?

I believe sgx bears the risk in theory for all settlement.

However for derivatives, this risk is very much mitigated (see notes 29 and 31 of FY2012 annual report) :

Note 29 states SGX's commitment/exposure of S$150m (including subsidiary's capital, SGX's guarantee, Derivatives clearing fund). If these funds are utilised, that will be a direct loss to SGX.

However, before reaching such a stage, the counterparty risk/exposure would likely be met by margin deposits monies provided by brokerages. At end June 2012, margin deposits for derivatives business (see note 31) was S$5.3bn versus requirement of S$3.382m. Like all margin trading, any shortfall in collateral will result in immediate forced settlement to mitigate losses by market participants, brokerage and exchange. Note that these funds (S$5.3bn) are managed by SGX group on behalf of members and therefore not on SGX's balance sheet.

For normal share trading, I believe the buyer who defaults is ultimately responsible for shortfall and the onus is on the buyer's broker to recover the loss from their client. I believe SGX, the seller and the seller's broker will not be responsible for the loss.

Hope that helps.

[Greenrookie]

Anyone knows how if SGX has to bear the counter party risk in the derivatives market if the customers default? For normal shares trading, if the buyer default who is responsible for the shortfall after force sell? I know they can go after the buyer, but in the meantime, is it the brokerage house or sgx that bear the risk?

I believe sgx bears the risk in theory for all settlement.

However for derivatives, this risk is very much mitigated (see notes 29 and 31 of FY2012 annual report) :

Note 29 states SGX's commitment/exposure of S$150m (including subsidiary's capital, SGX's guarantee, Derivatives clearing fund). If these funds are utilised, that will be a direct loss to SGX.

However, before reaching such a stage, the counterparty risk/exposure would likely be met by margin deposits monies provided by brokerages. At end June 2012, margin deposits for derivatives business (see note 31) was S$5.3bn versus requirement of S$3.382m. Like all margin trading, any shortfall in collateral will result in immediate forced settlement to mitigate losses by market participants, brokerage and exchange. Note that these funds (S$5.3bn) are managed by SGX group on behalf of members and therefore not on SGX's balance sheet.

For normal share trading, I believe the buyer who defaults is ultimately responsible for shortfall and the onus is on the buyer's broker to recover the loss from their client. I believe SGX, the seller and the seller's broker will not be responsible for the loss.

Hope that helps.

Thanks!

[specuvestor]

Technically SGX as the clearing house will be ultimately responsible for the trades as a counterparty for both legs of the trade. That is why SGX has a Clearing Fund to backstop and ultimately a fidelity fund under S176 of SFA

But in reality for derivatives trades, the margins help to ensure SGX will not be impacted if executed properly. See Barings Nick Leeson case for reference.

As for the clearing of shares, see the CLOB fiasco to have a sense how SGX wriggle itself out of responsibility.

[Greenrookie]

Er, sorry for my ignorance. I saw on its website that it has appoint quite a number of members like Kim eng to be the clearing house of the derivatives. It means SGX pass risk and also the pie of clearance fees to its members?

[specuvestor]

They are the clearing MEMBER who can act on behalf of the clearing house. All members contribute to the fund (s?)

[Temperament]

Is it any surprise to anyone SGX has quite a good 4th quarter? Just saw its good report on CNA.