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Singapore Exchange Limited (SGX) is inviting public comments on proposed rule amendments to facilitate the use of the Negotiated Large Trade (NLT) facility in the derivatives market as part of its business continuity initiatives. This proposed contingency measure seeks to provide an alternative trading option for investors to the derivatives market operated by Singapore Exchange Derivatives Trading Pte Ltd (SGX-DT) when electronic trading access is interrupted.
Under the proposal, SGX may exercise its discretion to waive minimum volume thresholds for NLTs in the derivatives market during such interruptions, in respect of affected Clearing Members and/or affected futures/options contracts. This will enable market participants to continue trading in the derivatives market without incurring deterrence fees for trades which fall below the minimum volume requirements.
Some of the factors which SGX will take into account in deciding whether to waive minimum volume thresholds for NLTs are:
- The number of Clearing Members affected;
- The estimated length of time required to resolve the interruption of the electronic access;
- The size of the open interest in a particular contract at the time of the interruption; and/or
- The impact of the interruption on SGX’s ability to operate a fair, orderly and transparent market.
Under the proposal, Clearing Members are required to report and register trades executed via the NLT facility during the affected period within 30 minutes. Such timely reporting is necessary for price transparency to all market participants, as a significant number of trades may be executed off-exchange (by way of the NLT facility) during the affected period.
Upon resolution of the interruption, SGX will issue a circular to all Clearing Members at least 30 minutes in advance specifying the end of the affected period. This 30-minute period will give market participants sufficient notice to execute any trades using the NLT facility before the end of the affected period, after which the usual requirements for minimum volume thresholds will be reinstated.
The usual minimum volume thresholds for NLTs in the derivatives market are set out in Appendix A of the consultation paper.
The consultation paper, which explains the rationale and proposed amendments in detail, will be available on SGX website at www.sgx.com from today. Market participants and members of the public can forward their feedback and suggestions on the above proposed amendments from today to 17 June 2008 via email and either by post/courier or fax:
Email: rules@sgx.comPost/Courier: Singapore Exchange Limited
2 Shenton Way, SGX Centre 1, #19-00
Singapore 068804.
Attn: Ms Chng Hwee Chin
Regulatory Policy Risk Management and RegulationFax: 6534 2207
