SGX Trading Rules Flashcards

In SGX futures trading, what does 'open interest' represent?

Answer: The total number of outstanding futures contracts that have not yet been settled, closed, or expired

Open interest is the total number of futures contracts that are outstanding — they have been entered into but not yet closed out, exercised, or expired. Rising open interest indicates new money flowing into the market; falling open interest indicates contracts are being closed.

What is 'initial margin' in futures trading?

Answer: The deposit required to open and maintain a futures position, serving as collateral against potential losses

Initial margin is the deposit required by the exchange and clearing house when opening a futures position. It serves as collateral to cover potential losses and ensures that both parties to the contract fulfil their obligations.

What is 'mark-to-market' in futures trading?

Answer: The daily settlement of gains and losses based on the closing futures price, credited or debited to the margin account

Mark-to-market is the daily settlement process in futures trading where gains and losses are calculated based on that day's closing price and credited or debited to the trader's margin account. This ensures financial obligations are settled regularly.

What is the 'basis' in futures trading?

Answer: The difference between the spot price of the underlying asset and the futures price

The basis is the difference between the spot (cash) price of an underlying asset and the price of the corresponding futures contract. Basis typically converges toward zero as the futures contract approaches its expiry date.

Which SGX futures product tracks Singapore's benchmark Straits Times Index?

Answer: SGX MSCI Singapore Index Futures

SGX MSCI Singapore Index Futures track the MSCI Singapore Free Index, which closely correlates with the Straits Times Index (STI). These futures allow investors to gain leveraged exposure to or hedge against Singapore equity market movements.

What is a 'margin call' in futures or securities margin trading?

Answer: A demand by the broker or clearing house for the investor to deposit additional funds when the account value falls below the maintenance margin level

A margin call is issued when an account's equity falls below the maintenance margin level due to adverse price movements. The investor must deposit additional funds to bring the account back up to the initial margin level, or the broker may close out the position.