Risk Management
Settlement assurance by SCCP involves the administration of appropriate risk management functions to prevent any untoward event that may affect its settlement process. In line with this, SCCP established a Risk Monitoring and Management System that continuously monitors potential risks that may impair the financial and operational capacity of Clearing Members to successfully settle their trade obligations. The Risk Monitoring and Management System of SCCP includes the following:
Mark-to-Market Collateral Deposit System
Since equities trades executed in the Exchange are settled two business days after Trade Date (T+2), SCCP is exposed to risks at any given time equivalent to two days’ worth of unsettled trades. Since the market price of the stocks that have been matched can fluctuate, price or market risk exists, where, if any of the counterparties to a trade fails to deliver securities sold or fails to pay for purchases made, SCCP as the CCP is exposed to losses due to fluctuation in market prices that may occur during the period where trades have not yet been settled.
To address the price or market risks, SCCP performs a daily revaluation called “mark-to-market”. SCCP computes for the exposure on each of the two (2) days’ worth of unsettled trades by comparing the contract price of each traded stock against its prevailing market value based on the stock’s closing price and netting out the buy and sell trades per stock. The computed exposure of each of the two days' unsettled trades is then netted out against each other to arrive at a net exposure which shall be the basis for the amount of the collateral to be required from a Clearing Member. Eligible as collateral are cash, securities comprising the PSEi, the PSE Dividend Yield Index, the PSE Midcap Index or PSE shares, execution of Early Delivery of the shares that have caused the negative exposure, or any combination of the three. For collateralization purposes and unless otherwise prescribed by the SCCP Board, securities that comprise the PSEi, the PSE MidCap Index and the PSE Dividend Yield Index shall be subject to a twenty five percent (25%) haircut based on their respective closing prices. All other shares acceptable as collateral but not belonging to any of the stated indices as approved by the SCCP Board, such as the PSE shares, shall be subject to a haircut of thirty five percent (35%) based on their respective closing prices. The haircut serves as a buffer against any price change in the securities collateral delivered by the Clearing Members. Alternatively, a Clearing Member can do an early delivery of the securities which caused the negative exposures.
Clearing Members concerned must deliver their mark-to-market collateral no later than 12:00 noon of T+1.
After collateral has been put up by a Clearing Member to cover its net negative exposure, it is possible that on the succeeding day/s, a Clearing Member shall be entitled to withdraw such collateral, in whole or in part. After performing the mark-to-market calculations for the day, SCCP determines each Clearing Member’s existing collateral balance whether it is greater than the collateral requirement, or that a Clearing Member’s net negative exposure no longer exists, in such case, the Clearing Member will be entitled to either a full or a partial refund.
Mode of Collateralization
Securities Eligible as Collateral Effective: August 03, 2026
List of Securities Eligible as CollateralUnusual Settlement Obligations
SCCP sets the threshold to determine unusual settlement obligations based on the behavior of each Clearing Member’s settlement activities during the immediately preceding six (6) months. This becomes the basis for establishing a separate normal limit for cash and securities obligations.
In determining the Clearing Members with above normal and highly unusual settlement obligations, SCCP computes the risk multiple of each Clearing Member which is equivalent to its actual amount of cash/securities obligations for a given settlement date divided by its own 6 months’ moving average net cash/securities obligations. A Clearing Member with a risk multiple exceeding the established threshold is included in the list of brokers subject to monitoring.
Trade Concentration on a Stock
SCCP sets a threshold to determine securities that exhibit trade concentration. A “trade concentration” report is prepared and submitted to the COO. Same is also included in the monthly Risk Management and Monitoring Report that is submitted to the SCCP Board during its regular board meetings.
Daily Average Netted Obligation vs Net Liquid Capital
SCCP has established a threshold to determine the capability of Clearing Members to fulfill their settlement obligations to SCCP by comparing their Net Liquid Capital (NLC) against their Daily Average Netted Obligations (DANO) for the month.
The ratio of the Clearing Member’s NLC over its DANO (NLC/DANO) shows the fraction of a Clearing Member’s NLC for every peso of its average obligation. This ratio shows the extent by which SCCP may readily recover from any of its defaulting Clearing Members and in the same manner, the value of SCCP’s exposure on its Clearing Members with deficient NLC.
The ratio of a Clearing Member’s DANO against its NLC (DANO/NLC) shows the percentage by which the NLC may be used up in order to cover its outstanding settlement obligations. Any resulting ratio in excess of 100% represents the percentage of settlement obligations that cannot be covered by a Clearing Member’s NLC.
During the review of the Clearing Member’s DANO vs Net Liquid Capital, other relevant factors such as the Clearing Member’s Risk Based Capital Adequacy Ratio is taken into consideration.
Compliance by Clearing Members with the Capitalization Requirements of the SEC and the Capital Markets Integrity Corporation
In coordination with the Capital Markets Integrity Corporation (CMIC), as part of SCCP’s risk management and monitoring process, SCCP regularly verifies the Clearing Members’ adherence to the key financial and regulatory requirements of the SEC and CMIC, such as, but not limited to risk-based capital adequacy (“RBCA”), aggregate indebtedness to net liquid capital (“AI to NLC”), net liquid capital (“NLC”) and unimpaired paid-up capital (“UPC”). Violations, if any, are reported to the SCCP Board of Directors during its regular board meetings.
Compliance to the Settlement Deadline
Monitoring Clearing Members’ compliance to settlement deadline is subdivided into three parts:
