Singapore Exchange Limited (SGX:S68) has opened a public consultation on the proposed introduction of Affiliate Segregation in cases where collateral of an affiliate of an SGX Derivatives Clearing (SGX-DC) member is protected if the member defaults on its own contracts.
Under the proposals, the affiliate’s positions may also be transferred to another SGX-DC member.
The outlined Affiliate Segregation arrangement is optional for SGX-DC members. If an SGX-DC member chooses to opt for the arrangement, its affiliates will benefit from a higher level of protection in the event the member defaults.
Affiliate Segregation adds to any arrangement that members may have in place to help their bank affiliates achieve greater capital efficiency under Basel III. Under Basel III, a bank must maintain adequate capital for its exposure to a central counterparty. The amount of capital required varies according to the level of protection the bank has.
To view the official announcement by SGX, click here.
To download the Consultation paper, click here.