On April 24, ISDA responded to the Singapore Exchange’s (SGX) consultation paper on revised limit on clearing members’ liability for multiple defaults. In its consultation paper, SGX proposed to limit a non-defaulting clearing member’s liability to meet multiple default losses arising within a 30-day period to three times the aggregate of its funded and unfunded clearing fund contributions (Prescribed Contribution) as determined at the start of the 30-day period and is independent of a clearing member’s resignation.

In the response, ISDA highlighted that while members appreciate SGX’s effort to cap clearing members’ liability without resignation, members feel that the limit of three times a clearing members’ prescribed contribution is high and recommend a lower cap in line with other established central counterparties and industry best practice, which is one or two times of the clearing member’s funded default fund. Members also feel that the calculation methodology of the clearing member’s clearing fund contribution available to meet losses arising from multiple defaults is complex and would welcome a simpler framework.