The fund, which consists of a pool of assets such as cash, bank guarantees and other financial resources, enables the Clearing House to deal with potentially large credit and/or liquidity risks that may arise when a TCP defaults on its payment or delivery obligation on any settlement day.
“As a front-line regulator, we are determined to ensure that the capital market infrastructure keeps pace with the growing demands for greater efficiency and risk management. The CGF is designed to ensure stability and enhance the reliability of the securities market,” said Yusli Mohamed Yusoff, Chief Executive Officer of Bursa Malaysia.”
The CGF will be utilised to cover liabilities of the Clearing House arising out of market contracts, typically when the TCP defaults. With CGF, the Clearing House is still able to continue its functions to other participants without disruption.
Based on a risk-based model that has been benchmarked against its peers, the quantum of the CGF is set at RM100 million. TCPs will contribute 15% (with a fixed contribution of RM10,000 in cash) to the CGF while the Clearing house will contribute 25% and Bursa Malaysia Bhd 60% in the form of a Standby Credit Facility. The contributions by TCPs will be reviewed on a quarterly basis.
The CGF is a common feature of most developed markets and a prescribed requirement by the International Organisation of Securities Commission (IOSCO).
