Proposed Removal Of Bypass Privileges In The SGX-DT Market

Singapore Exchange (SGX) is consulting the public on proposed rule changes as part of enhancements in risk controls in the SGX Derivatives Trading market.

SGX is introducing exchange-hosted pre-trade risk checks on available customer credit for incoming orders before they reach SGX’s order matching engine. These checks are in line with the Futures Industry Association’s recommendation for exchange-hosted risk controls. They improve the quality of the derivatives market and reduce systemic risk. Clearing members may set limits on customers’ orders, as part of customer credit management. 

Currently, exemption from pre-trade risk checks are afforded to customers under certain safeguards. With the availability of exchange-hosted pre-trade risk checks, such exemptions will be removed.

Along with the introduction of these risk checks, SGX proposes certain rule changes governing direct access to its derivatives markets, in alignment with international standards.  These are the same rule changes proposed in the SGX securities market.

The proposed rule changes are intended to:

• Make pre-trade risk checks mandatory for all orders, as these controls will be easily available to Members.
• Introduce Member requirements for customers who use their own order management systems.
• Require Members to put in place minimum credit standards for customers with direct market access.
• Require Members to have comprehensive programmes for maintaining the integrity of their order management systems.

SGX expects to make the rule changes in the second quarter of the year.

The consultation paper and related details are available at www.sgx.com. Market participants and members of the public are invited to write in with their comments and suggestions from today until 22 April 2012 via email and either by post/courier or fax to: