Under the proposed changes, in the event of a security delivery fails, the defaulting clearing member or broker firm will be required to settle securities obligation in the form of cash.
Presently, a broker firm which can not meet its obligations to clients can just tap the securities borrowing and lending facility.
Upon failure to borrow shares from other clearing members, the SCCP executes a buy-in procedure on the fourth day from the date of the transaction.
The SCCP has also proposed that any advances made from the clearing and trade guaranty fund (CTGF) by any defaulting member should be considered as part of the broker firm’s cash settlement obligation and automatically forms part of his cash netting balance for the following settlement day. It also wants the amount contributions to the CTGF calculated for all guaranteed transactions.
The SCCP likewise suggested that daily calculation of exposures for collateralization requirements be based on the highest and/or lowest projected prices on settlement date plus and/or less the pre-set uplift and/or haircut factor.
It also proposed that fees/interest charges on the utilization of the CTGF for settlement defaults should be computed using the compounded interest method and not the simple interest method.
SCCP is a private institution organized primarily as a clearance and settlement agency for depository eligible trades executed in the Philippine Stock Exchange.