New regulatory regime for market operators with the commencement of The Securities and Futures (Amendment) Act 2018 (“SF(A) Act”)

The Securities and Futures (Amendment) Act 2017 (“SF(A) Act”), which was passed in Parliament on 9 January 2017, gave effect to policy proposals aimed at completing the legislative reforms for the regulation of over-the-counter (“OTC”) derivatives. These proposals included:

  1. extending the markets regime to OTC derivatives market operators;
  2. introducing powers to mandate the trading of OTC derivatives on organised markets; and
  3. extending the capital markets services licensing regime to intermediaries dealing in OTC derivatives

MAS is now seeking views on proposed regulations to operationalise the new Part VIC of the SFA on mandatory trading of OTC derivatives contracts on organised markets i.e. exchanges or other centralised trading facilities. This will help to improve market transparency.  This requirement will complete MAS’ implementation of the G20 OTC derivatives reforms.

Proposal

MAS proposes to impose obligations for the most globally-traded OTC derivatives, namely interest rate swaps denominated in US Dollar, Euro and Pound Sterling to be traded on organised markets, i.e. exchanges or other centralised trading facilities. These obligations will apply to banks whose gross notional outstanding OTC derivatives exceed $20 billion.  MAS expects that about 80% of Singapore’s market in these products would have to be executed on organised markets following the commencement of the proposed trading obligations.

The US and the EU regulatory authorities have already implemented similar trading obligations for the same OTC derivatives products. MAS plans to seek equivalence determinations from the US and EU for exchanges and other centralised trading facilities in Singapore.  This will allow these markets in Singapore to be used by US and EU market participants to fulfil their trading obligations.

List of questions

Question 1. MAS seeks views on the proposal to subject IRS denominated in USD, EUR and GBP, with the contract specifications set out in Table 1, to trading obligations – refer page 7

Question 2. MAS seeks views on the proposal to impose trading obligations on banks that exceed a threshold of S$20 billion gross notional outstanding of OTC derivatives contracts booked in Singapore for each of the last four quarters. Refer page 8

Question 3. MAS seeks views on the proposal to exempt public bodies from trading obligations.  Refer page 8

Question 4. MAS seeks views on imposing trading obligations to products that are traded in Singapore by both counterparties that exceed the proposed threshold of S$20 billion gross notional outstanding of OTC derivatives contracts booked in Singapore. Refer page 9

Question 5. MAS seeks views on the proposal to exempt intra-group transactions from trading obligations. . Refer page 10

Question 6. MAS seeks views on the proposed timing for the commencement of trading obligations in conjunction with the commencement of the SF(A) Act. Refer page 11

Question 7. MAS seeks feedback on the trading facilities which market participants may access, or intend to access, for the trading of USD, EUR and GBP IRS. Refer page 11

Question 8. MAS seeks feedback on any other considerations and timing concerns that may affect market participants’ ability to access trading facilities for the trading of USD, EUR and GBP IRS. Refer page 11

Question 9. MAS seeks comments on the draft SF(TDC)R in Annex B. Refer page 11

Question 10. MAS seeks views on the proposal to subject IRS denominated in EUR and GBP, with the contract specifications set out in Table 2, to clearing obligations. Refer page 12

Please view the full consultation paper in the given link http://www.mas.gov.sg/News-and-Publications/Consultation-Paper/2018/Consultation-Paper-on-Draft-Regulations-for-Mandatory-Trading-of-Derivatives-Contracts.aspx

Mas welcome interested parties to submit their comments to capital_markets@mas.gov.sg by 23 March 2018. Electronic submission is encouraged. MAS would appreciate that you use the MAS given format for your submission to ease their collation efforts.

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