Chapter 19 — Marginable Futures Contracts
This Chapter shall be applicable to the listing and trading of Marginable Futures Contracts on SGX-ST, the terms and conditions of such Marginable Futures Contracts, the handling of orders, the conduct of accounts, the settlement thereof, and other matters relating to the listing and trading of Marginable Futures Contracts on SGX-ST. Except as otherwise specified in this Chapter, the Rules, Directives and Practice Notes shall, where applicable, apply to the trading of Marginable Futures Contracts on SGX-ST.
19.2 Listing of Marginable Futures Contracts(1) The commercial and technical terms of Marginable Futures Contracts are stated in the Contract Specifications.(2) SGX-ST may, from time to time, list any Marginable Futures Contracts for trading.
19.3 Contract Specifications(1) Marginable Futures Contracts shall be governed by the Rules and the Contract Specifications for Marginable Futures Contracts. In the event of a conflict between the Rules and the Contract Specifications, the Rules shall prevail.(2) SGX-ST may modify the Contract Specifications in response to market developments. In the event of such modification, SGX-ST shall provide its Members with no less than 2 weeks' prior notice before any modification to Contract Specifications takes effect.
19.4 Adjustments Due to Corporate Actions(1) In the event where the underlying security of a Marginable Futures Contract undergoes a corporate action or such other event which SGX-ST considers relevant, SGX-ST may prescribe the quantity of underlying security to be delivered, contract price, Last Trading Day, underlying securities to be delivered and such other terms covered under the relevant Marginable Futures Contract Specifications, where necessary.(2) As far as practicable, SGX-ST will give prior notice of such adjustments and the effective date.(3) Any adjustment determined in accordance with this Rule is final and binding on all parties.
19.5 Selection, Removal and Restrictions on Trading of Marginable Futures Contracts
19.5.1 Nomination of securities
SGX-ST may, from time to time, nominate an underlying for Marginable Futures Contracts. If SGX-ST decides, for any reason, that an underlying is no longer suitable for Marginable Futures Contracts, SGX-ST shall:—(a) not list any new Marginable Futures Contract covering that underlying;(b) have the discretion to prohibit Trading Members from opening, or allowing their customers to open, any new position in Marginable Futures Contracts covering that underlying; and(c) have the discretion to direct Trading Members to take action to offset, or require their customers to offset, any existing positions in Marginable Futures Contracts covering that underlying.
19.5.2 Removal from Quotation and Restriction of Trading before Last Trading Day
Subject to giving prior notification, SGX-ST may remove any Marginable Futures Contract from quotation before the Last Trading Day if all positions in such Marginable Futures Contract have been offset. If there are positions in such Marginable Futures Contract that are not offset, SGX-ST may require that such positions be cash settled immediately according to the terms as determined by SGX-ST, or restrict trading only to enable those positions to be offset or to the extent that SGX-ST deems such trading to be necessary or desirable for the maintenance of a fair, orderly and transparent market.
19.6 Trading Halt or Suspension of Trading
19.6.1 Trading Halt or Suspension of Trading(1) SGX-ST may halt or suspend the trading of Marginable Futures Contracts if:—(a) trading in the underlying has been halted or suspended; or(b) SGX-ST deems it necessary or desirable for the maintenance of a fair, orderly and transparent market.(2) Unless otherwise decided by SGX-ST, the obligations of the buyers and sellers under the Marginable Futures Contracts which have been halted or suspended shall not be affected during the period of trading halt or suspension.
19.6.2 Resumption of Trading
The trading of Marginable Futures Contracts which have been halted or suspended under Rule 19.6.1 may be resumed if SGX-ST determines that:(1) the conditions which led to the trading halt or suspension are no longer present, or(2) resumption of trading will promote the maintenance of a fair, orderly and transparent market.
19.7 [Rule has been deleted.]
19.8 Management of Positions
A Trading Member must immediately notify SGX-ST of the details of any account carried on its books that exceeds the monitoring thresholds on positions that have not been offset, as prescribed by SGX-ST from time to time. Such monitoring thresholds may be imposed on any account or any single customer, and may include any one or a combination of the following:—(1) maximum number of lots of long positions that have not been offset, in gross or net, in any Marginable Futures Contract; and(2) maximum number of lots of short positions that have not been offset, in gross or net, in any Marginable Futures Contract.
SGX-ST shall, in the interest of maintaining a fair, orderly and transparent market, monitor the total number of positions that have not been offset, of all accounts opened with all Trading Members in any Marginable Futures Contract on either side (long or short), or both sides of the market, and where appropriate, take action under Rule 19.8.3.
To reduce a Trading Member's risk exposure in trading and dealing in any Marginable Futures Contracts, or for the purpose of maintaining a fair, orderly and transparent market, SGX-ST shall have the right to impose on the Trading Member such measures as it deems necessary or desirable. The Trading Member must comply with all measures which are imposed by SGX-ST. These may include:—(1) additional margin requirements; and(2) offsetting existing positions.
19.8.4(1) matters relating to any position, including the number of issued shares, free float, liquidity or volatility of the underlying;(2) the financial position of the Trading Member;(3) the Trading Member's credit exposure to a single customer; and(4) any such other factors that SGX-ST deems necessary to maintain a fair, orderly and transparent market.
In computing positions that have not been offset for the purpose of Rule 19.8, the positions of all accounts directly or indirectly owned or controlled by a person or persons, and the positions of all accounts of any person or persons acting in concert and the positions of all accounts in which a person or persons have a proprietary or beneficial interest, shall be accumulated and deemed to be the positions of each of such persons as if each owned or controlled all the aggregate positions individually.
19.9 Internal Controls
A Trading Member must establish and maintain adequate internal control systems to:—(1) set credit limits or position limits;(2) monitor positions to manage market and credit risks, and comply with notification requirements on monitoring thresholds as prescribed by SGX-ST;(3) compute and collect margins, including conducting daily valuation of customers' positions and collateral;(4) monitor margin calls;(5) manage customers' accounts that are in margin deficit;(6) manage customers' accounts that may fail to meet settlement obligations;(7) define and manage sources of liquidity to ensure that there are sufficient liquidity facilities to meet increased settlement obligations;(8) limit the impact of significant market movements through the use of tools such as cash flow projections, stress testing or credit limits; and(9) meet such other requirements as SGX-ST may prescribe from time to time.
19.10 Margin Requirements
For the purpose of this Rule 19.10:—
Term Meaning "Customer Asset Value" refers to moneys and the market value of assets in a customer's account subject to such hair-cut as specified by SGX-ST. "Initial Margins" refers to the minimum amount required to be deposited by customers, as prescribed by CDP, with a Trading Member for positions in Marginable Futures Contracts. This minimum amount is distinct from and in addition to Variation Margins. "Maintenance Margins" refers to that component of Required Margins, as determined by CDP, which must be maintained in a customer's account subsequent to the deposit of Initial Margins for that customer's positions in Marginable Futures Contracts. "Required Margins" refers to the sum of Maintenance Margins and Variation Margins. "Valuation Price" means the official price of Marginable Futures Contracts prescribed by SGX-ST for the purpose of determining Variation Margins. "Variation Margins" refers to that component of Required Margins comprising the mark-to-market gains and losses, in relation to the price at which the Marginable Futures Contract was bought or sold, arising from the daily valuation of positions, except that Variation Margins are not required if the Trading Member permits a customer to realise a gain or loss pursuant to executing a trade to offset an existing position.
A net loss increases the Variation Margins and Required Margins amount, and a net profit decreases the Variation Margins and Required Margins amount.
In calculating the mark-to-market losses or gains, a Trading Member must use the Valuation Price as determined by SGX-ST.
19.10.2(1) A Trading Member must procure Initial Margins from its customers and must require the customers to meet the Required Margins for the purpose of meeting margin requirements of Marginable Futures Contracts within two Market Days from the trade date (T+2). Initial Margins and Required Margins must be met in the form of collateral as prescribed by SGX-ST from time to time. Such collateral must be in the form of cash, government securities, selected common stocks, bank certificates of deposit, gold bars, gold certificates, or such other instruments as SGX-ST permits. Valuation of such collateral must be in accordance with the hair-cut rates prescribed by SGX-ST.(2) Except for a Trading Member that holds a licence specified in Rule 4.1.1(1)(b), a Trading Member shall not accept as collateral, currency and financial instruments denominated in currencies which are subject to exchange controls such that they are illegal tender outside the currency's home country, or are restricted by any form of capital controls for the purpose of meeting margin requirements of Marginable Futures Contracts.
If the Customer Asset Value falls below the Required Margins, the Trading Member must call for additional margins from the customer to bring the Customer Asset Value balance to no less than the sum of Initial Margins and Variation Margins within two Market Days from the date the Customer Asset Value falls below the Required Margins.
Except for trades which reduce a customer's Required Margins, a Trading Member must not allow a customer to incur any new trade unless:—(1) the minimum Initial Margins for the new trade are deposited or the Trading Member has reason to believe that the minimum Initial Margins will be deposited within two Market Days from the trade date (T+2); and(2) the Customer Asset Value complies with the Required Margins, or the Trading Member has reason to believe that the additional margins to be deposited pursuant to Rule 19.10.3 will be deposited within two Market Days from the trade date (T+2).
Trading Members must not set margin requirements that are less stringent than those prescribed by SGX-ST.
Mark to market gains of a customer may be utilised by the Trading Member to meet Initial Margins for the same customer.
A Trading Member may allow a customer to withdraw Excess Margins provided such withdrawal will not cause the Customer Asset Value to be less than zero.
"Excess Margins" refers to the amount of Customer Asset Value that is in excess of the sum of the Initial Margins and Variation Margins.
A Trading Member must comply with such requirements on the computation and monitoring of a customer's margins as SGX-ST may prescribe.
19.10.11 Under-Margined Accounts(1) A Trading Member must immediately notify SGX-ST when the Customer Asset Value in any account does not meet the sum of Initial Margins and Variation Margins by an amount which exceeds the Trading Member's aggregate resources or such other thresholds as may be determined by SGX-ST, except that no notification is required for the Trading Member's own Stock Account.(2) SGX-ST may require the Trading Member to submit to SGX-ST information pertaining to any matter in such form and within such time as may be stipulated by SGX-ST.
19.10.12 Customer to Comply with Margin Requirements
For the avoidance of doubt, a Trading Member must require a customer to comply with the margin requirements prescribed under Rule 19.10, even if the customer has entered into an arrangement to meet his delivery obligations in connection with Marginable Futures Contracts.
19.10.13 Prohibition on Margin Financing
For the avoidance of doubt, a Trading Member must not under any circumstances enter into a financing arrangement with a customer in respect of that customer's margins requirements which would allow the customer to trade without meeting the margin requirements prescribed under Rule 19.10.
19.11 Capital Requirement for Marginable Futures Contracts(1) For the purpose of calculating counterparty risk requirements under the Notice on Risk Based Capital Adequacy Requirements for Holders of Capital Markets Services Licences:(a) "margin deficiency" referred to in the Notice on Risk Based Capital Adequacy Requirements for Holders of Capital Markets Services Licences is the amount required for the Customer Asset Value to meet the Variation Margin and Maintenance Margin, and in the case where Customer Asset Value is not sufficient to meet Variation Margin, the margin deficiency is the amount of Maintenance Margin; and(b) "negative equity" referred to in the Notice on Risk Based Capital Adequacy Requirements for Holders of Capital Markets Services Licences is the amount required for the Customer Asset Value to meet the Variation Margin.(2) For the avoidance of doubt, a Trading Member shall compute Total Risk Requirement for Marginable Futures Contracts in the same manner as prescribed in the Notice on Risk Based Capital Adequacy Requirements for Holders of Capital Markets Services Licences.
19.12 Prohibited Trading Practices
The following provisions apply in relation to overtrading:—(1) A Trading Member and its Trading Representatives must not execute any trade beyond any limits imposed by SGX-ST, CDP or the Authority. A Trading Member must ensure that its Trading Representatives and its customers do not trade beyond such limits. A Trading Member or its Trading Representative shall be guilty of overtrading if the respective Trading Member or its Trading Representative enters into any trade or trades beyond any limits imposed from time to time by SGX-ST, CDP or the Authority.(2) If a Trading Member or Trading Representative is charged with violating this Rule 19.12.1, SGX-ST may at its discretion suspend that Trading Member or Trading Representative from trading until such time as the Disciplinary Committee or the Appeals Committee has completed the hearing in respect of such charge against such Trading Member or Trading Representative;(3) Each trade entered into beyond any limits imposed by SGX-ST, CDP or the Authority shall be deemed to be a distinct and separate violation of this Rule and shall be punishable as such. If a Trading Member or Trading Representative is charged by SGX-ST for overtrading, it is not necessary for SGX-ST to show that the Trading Member or Trading Representative intended to overtrade. The act of overtrading is sufficient to constitute an offence under this Rule.
19.13 Settlement of Marginable Futures Contracts(1) Chapter 9 shall apply to the delivery and settlement of Marginable Futures Contracts.(2) A Trading Member may allow the use of cash collateral deposited by a buying customer for the settlement of the contract value.
19.14 [Rule has been deleted.]