On 21 February 2018, the Monetary Authority of Singapore (“MAS”) issued a consultation paper inviting comments on the proposed Securities and Futures (Trading of Derivatives Contracts) Regulations (“SF(TDC)R”) to operationalise the new Part VIC of the Securities and Futures Act (Cap. 289), with respect to mandatory trading of over-the-counter (“OTC”) derivatives contracts on organised markets (i.e. exchanges or other centralised trading facilities).
Summary of key aspects of the mandatory trading regime
The table below summarises the key aspects of the mandatory trading regime proposed by MAS.
| No. | Area of concern | Details |
|---|---|---|
| 1 | Specified derivatives contracts to be traded on an organised market | US Dollar ("USD"), Euro ("EUR"), and Pound Sterling ("GBP") interest rate swaps ("IRS") which are more liquid. |
| 2 | Specified persons to be subject to trading obligations | 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 quarters1. All other specified persons will initially be exempted2. Public bodies (including all central banks and governments, and international multilateral organisations such as the Bank for International Settlements, the International Monetary Fund and the World Bank) will also be exempted. |
| 3 | Circumstances under which contracts are subject to trading obligations | Both counterparties (which must be specified persons as described above) will be subject to the trading obligations should a mandated product be traded in Singapore by both counterparties, i.e. traders based in Singapore - representing both counterparties - are responsible for the transaction involving the mandated product. |
| 4 | Exemptions from trading obligations | Intra-group transactions and package transactions will be exempted. |
| 5 | Implementation details | The SF(TDC)R and Securities and Futures (Amendment) Act 2017 are targeted for commencement in 3Q 2018. Appropriate time will be provided for market participants to make arrangements to access organised markets, both domestic and overseas, that are licensed under the revised markets regime so that such market participants can meet the trading obligations. |
Proposed products subject to clearing obligations
Separately, in view of the proposed implementation of trading obligations, MAS also proposes to subject IRS denominated in EUR and GBP, with certain contract specifications, to clearing obligations.
Consultation Period
The public consultation period ends on 23 March 2018.
A copy of the consultation paper can be assessed here.
[1] This effectively will be the same group of banks that will be subject to MAS’ clearing obligations.
[2] MAS retains the right to review the specified persons to be subject to (or exempt from) the trading obligations, and the trading obligation thresholds on a regular basis.
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This article is written by Eric Chan from Shook Lin & Bok LLP.
This article does not constitute legal advice or a legal opinion on any matter discussed and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and practice in this area. If you require any advice or information, please speak to practicing lawyer in your jurisdiction. No individual who is a member, partner, shareholder or consultant of, in or to any constituent part of Interstellar Group Pte. Ltd. accepts or assumes responsibility, or has any liability, to any person in respect of this article.
