Principle 7: Liquidity risk An FMI should effectively measure, monitor, and manage its liquidity risk. An FMI should maintain sufficient liquid resources in all relevant currencies to effect same-day and, where appropriate, intraday and multiday settlement of payment obligations with a high degree of confidence under a wide range of potential stress scenarios that should include, but not be limited to, the default of the participant and its affiliates that would generate the largest aggregate liquidity obligation for the FMI in extreme but plausible market conditions.
7.1	An FMI should have a robust framework to manage its liquidity risks from its participants, settlement banks, nostro agents, custodian banks, liquidity providers, and other entities.
The Risk Management framework includes a Liquidity Risk Management policy for the management of liquidity risks arising from its participants, Settlement Banks, custodian banks, liquidity providers, and other entities. As APEX Clear keeps its margin monies in cash or cash equivalents, operational liquidity risks are insignificant. The main liquidity risks affecting APEX Clear are thus default liquidity risks arising from default of its Clearing Member or settlement / custodian banks. APEX Clear collects margin collateral and guaranty fund contributions from its Clearing Members, and also implemented bank exposure as well as concentration limits to mitigate these default liquidity risks. In addition, APEX Clear is also liaising with various global / local banks for committed bank credit lines in line with its growth in business activities to increase its qualifying liquid resources. The Liquidity Risk Management policy is reviewed annually.
7.2	An FMI should have effective operational and analytical tools to identify, measure, and monitor its settlement and funding flows on an ongoing and timely basis, including its use of intraday liquidity.
APEX Clear performs its clearing cycle 2 times a day, once intraday and once at end of day, where positions will be marked to market and margin calls may be issued to its Clearing Members to top up any shortfall in margin requirements. If necessary, APEX Clear can also perform ad-hoc valuations and margin calls during periods of high volatilities. This ensures that margins are collected promptly and losses are not accumulated. APEX Clear also performs daily credit and liquidity stress tests to check that the Guaranty Fund as well as its qualifying liquid resources remains sufficient to cover the potential losses that may arise from identified contingency events, a defaulting Clearing Member’s open positions or default of a non-participant. APEX Clear’s Clearing system provides data on the amount of excess margins that Clearing Members have with APEX Clear that may potentially be withdrawn the next day. APEX Clear ensures that there are sufficient liquid assets on hand to meet this potential withdrawal on a daily basis. APEX Clear has arrangements with its Settlement Banks for them to provide confirmations to APEX Clear within pre-agreed timelines. Confirmations provide assurance of any fund flows in APEX Clear’s account in real time as well as reconciliation of balances between APEX Clear’s bank accounts and system records. APEX Clear will monitor the settlement and funding flows on an ongoing and timely basis.