Singapore Regulator Reviews Regulation of the Derivatives Market

The Monetary Authority of Singapore (MAS), capital market regulator in Singapore is conducting a review on the regulatory oversight of the over-the-counter (OTC) derivatives  market in Singapore and is seeking public comments on its proposals: http://www.mas.gov.sg/resource/publications/consult_paper/2012/OTCDerivativesConsult.pdf.

In developing these proposals, MAS has taken into consideration international developments such as the commitment pledged by the Group of Twenty Finance Ministers and Central Bank Governors (G20), as well as recommendations made by the Financial Stability Board (FSB) and other standard setting bodies, to improve the regulation and supervision of the derivatives market. These form part of the global effort to strengthen the international financial regulatory system in the wake of the 2008/09 global financial crisis.

Regulatory Oversight of Over-the Counter Derivatives Market

Under the proposals, MAS will expand the scope of the Securities and Futures Act (SFA), Chapter 289 to include:

i) mandatory central clearing of OTC derivative trades at regulated central counterparties;
ii) mandatory reporting of OTC derivative trades to regulated trade repositories; and
iii) putting in place regulatory regimes for market operators, clearing facilities, trade repositories and market intermediaries for OTC derivatives. 

MAS has considered amendments to relevant parts of the SFA arising from the regulation of OTC derivatives, and will make changes to align the treatment for OTC derivatives with that for securities and futures contracts where appropriate. 

In addition, MAS is currently working with the Singapore Foreign Exchange Market Committee (SFEMC) to encourage standardisation of OTC derivatives. MAS is also engaging the industry to better understand the costs and benefits of introducing mandatory trading on exchanges or electronic platforms in Singapore’s context and will consult on this at a later date.

Ms Teo Swee Lian, Deputy Managing Director (Financial Supervision), said, “The proposals will reduce systemic risk, improve transparency and protect against market abuse in Singapore’s OTC derivatives market, in a manner consistent with the G20 recommendations.”

Regulatory Oversight of OTC commodity derivatives

As part of the review, it is also proposed that the regulatory oversight for commodity derivatives be transferred from the Commodity Trading Act, currently administered by the International Enterprise (IE) Singapore, to the SFA. The objective of the proposed transfer is to harness synergies and align regulatory approaches across the major classes of OTC derivatives, while at the same time, provide greater clarity to industry participants on the regulatory approach for commodity futures and other commodity derivatives. An MAS-IE joint consultation paper on the transfer of regulatory oversight can be accessed here: http://www.mas.gov.sg/resource/publications/consult_papers/2012/TransferofRegOversightofCommodityDerivatives.pdf

MAS invites interested parties to give their views and comments on the proposals outlined in the two consultation papers.  The consultation period for both consultation papers will end on 26 March 2012.