Financial
Audit
Financial Audit & Compliance ProgrammeBursa Malaysia Derivatives Clearing monitors the
financial position of its members through:
Financial reporting
General Clearing Members are required to submit an ANC statement (prepared according to the
business rules), balance sheet, an income/loss statement and a statement of clients' segregated
funds on a monthly basis.
Direct Clearing Members are required to submit an NTA statement on a monthly basis and their
annual audited accounts to Bursa Malaysia Derivatives Clearing.
Audits
Bursa Malaysia Derivatives Clearing conducts routine and surprise audits of the member's
financial statements and reviews their compliance with the business rules and internal controls.
The audit team also reviews the member's risk management policies and procedures.
Information-sharing
The Exchange conducts audits on its members to ensure compliance with the Exchange's
business rules and the results of these audits are shared with Bursa Malaysia Derivatives Clearing,
where it concerns a Clearing Member.
In addition the Exchange is obliged under the clearing agreement with Bursa Malaysia
Derivatives Clearing to inform it of the general conduct and trading activities of members
particularly if the member faces any financial difficulty.
Intra-day monitoring
The members' positions during the trading day are constantly monitored. This enables Bursa
Malaysia Derivatives Clearing to assess the impact of price movements and economic events on the
adequacy of the members' margins and capital base.
Disciplinary and Default ActionsThe risk management tools of Bursa Malaysia Derivatives
Clearing, insofar as they relate to the rights and the obligations of the Clearing Members
vis-a-vis the Clearing House, are implemented through its business rules. Therefore, a member
default means both a failure to perform the obligations under an open contract as well as
obligations under the Bursa Malaysia Derivatives Clearing business rules. Disciplinary and default
actions perform the dual role of:
- discouraging member defaults in performing contractual and membership obligations.
- ensuring that a member default does not adversely affect the entire clearing membership and the
market.
Bursa Malaysia Derivatives Clearing can:
- impose a fine of up to RM1 million on a member
- require additional funds to be deposited in the case of a default other than a default in
payment obligations
- suspend or terminate a clearing membership
- liquidate or transfer open contracts of a defaulting member
- utilise any cash or collateral of the defaulting Clearing Member to cover its obligations
- utilise the security deposit and clearing fund
In the event of an emergency, where there is a threat to the financial integrity of Bursa
Malaysia Derivatives Clearing or its clearing members, Bursa Malaysia Derivatives Clearing can take
special actions such as refusing to register market contracts or placing conditions on their
registration, obtaining emergency settlement prices from the Exchange, liquidating contracts and
obtaining additional cash or collateral from Clearing Members.
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