29 May 2019
On 10 May 2019, Singapore Exchange Limited (“SGX”) announced that the Singapore Exchange Securities Trading Limited Rules (“SGX-ST Rules”), including those on securities trading and market practices, will be amended on 3 June 2019. The changes are aimed generally at adopting a more principles-based, rather than prescriptive, approach, and supporting members, dealers and remisiers in their activities. The SGX-ST Rules will also be reorganised for improved clarity.
SGX’s announcement follows its public consultation conducted from 10 October 2017 to 7 November 2017 on proposed amendments to the SGX-ST Rules and other rulebooks, including the following:
- updating of policies and rules relating to Singapore Exchange Securities Trading Limited (“SGX-ST”) members, registrants and their obligations;
- changes arising from amendments to the Securities and Futures Act (“SFA”); and
- structural and drafting changes to the SGX-ST Rules.
On 10 May 2019, SGX issued its Response, which focuses on the updates to the policies and rules on members of the SGX-ST, registrants and their obligations. SGX noted that respondents were generally supportive of the proposed rule amendments.
CEO to be officer responsible for compliance with rules
The SGX-ST Rules will be amended to require members to register with SGX-ST their chief executive officer (“CEO”) or equivalent, instead of their executive director, as the person responsible for ensuring the members’ compliance with the SGX-ST Rules. This is because the CEO is ultimately responsible for the day-to-day management of the entire company.
Likewise, the clearing rules of The Central Depository (Pte) Limited (“CDP Clearing Rules”) will also be amended to require clearing members of The Central Depository (Pte) Limited (“CDP”) to register with CDP their CEO or equivalent, instead of their executive director, as the person responsible for ensuring the members’ compliance with the CDP Clearing Rules.
New notification framework for registration of trading representatives
SGX proposed amending the SGX-ST Rules such that SGX-ST would no longer approve registrations of trading representatives. Instead, trading members would be left to ensure that an individual meets SGX-ST’s eligibility criteria before registering that individual with SGX-ST as a trading representative. SGX clarified in its Response that it will continue to maintain the register of trading representatives.
Less prescriptive requirements on written agency agreement between members and remisiers
SGX proposed amendments to the SGX-ST Rules such that the specific terms to be included in the written agency agreement between a member and a remisier would no longer be prescribed. In response to suggestions to have these terms set out as non-binding guidance in a practice note, SGX stated that it does not propose to retain any reference to the terms that should be present in any arrangement between members and remisiers. This is because the objective of the amendment is to avoid prescribing or suggesting how members and remisiers should structure their relationship.
Removal of requirement for senior management pre-approval for staff trading as long as safeguards in place
SGX proposed amendments to the SGX-ST Rules to remove the requirement for a member’s officers, employees or agents (collectively, “staff”) to obtain prior approval from senior management before executing trades for their own benefit, and to retain only those rules that require members to: (a) ensure that their staff do not use confidential information to trade for their own benefit, and (b) monitor their staff’s trading activities. In its Response, SGX stressed that the objective is for members to have in place the ability to monitor the trades of their staff and procedures to prevent staff’s misuse of confidential information. While members are free to require their staff to trade only through them, it is not SGX’s intention to oblige members to require them to do so.
Improved risk management controls on trading representatives
SGX proposed amendments to the SGX-ST Rules to require members to perform, as part of their risk management control, adequate credit assessments on their trading representatives (including dealers). In its Response, SGX clarified that it does not intend to require assessments of a trading representative’s credit standing. However, SGX will require trading limits to be assessed and assigned to each trading representative. Such an assessment could involve taking into consideration factors such as the trading representative’s experience in the industry and track record.
New requirements on keeping records for compliance
SGX proposed that trading members “check data and records for quality and accuracy on an on-going basis and correct any quality or accuracy defects detected”. Such records are kept to evidence compliance with the SGX-ST Rules. Responding to concerns that this requirement could be impractical and onerous, SGX said that members may adopt a sensible approach to the checking of data and records to ensure that the objective stated in the rule is achieved. This could include the use of existing controls and audit.
Members will also have to obtain customer consent before disclosing a customer’s records to SGX-ST. In response to concerns that customers may refuse to give consent (e.g. during an investigation), SGX stated that members could obtain consent upfront during account opening.
Business continuity requirements
SGX proposed amendments to the SGX-ST Rules to have business continuity arrangements tested “regularly”. In its Response, SGX clarified that as best practice, business continuity arrangements should be tested at least annually.
In its consultation, SGX proposed removing the requirement for members to inform SGX-ST before allowing their trading representatives to carry out off-premises or mobile broking, provided any limitations that could reasonably be expected to arise from such practice are disclosed to customers in writing. Following feedback that mobile broking should not be an exception to guard against specifically, and that the disclosure requirement would impose significant administrative burden and unduly disadvantage trading representatives on mobile broking, SGX will remove the entire rule on off-premises broking.
Implementation of changes
Amendments to the rulebooks resulting from changes to the SFA were implemented at the same time the relevant SFA amendments came into effect.
The rest of the amendments to the SGX rulebooks will take effect on 3 June 2019.
The following materials are available on the SGX website www.sgx.com:
- News release
- Response to Consultation Paper: Proposed changes to the SGX-ST Rules and other rulebooks
Allen & Gledhill Regulatory & Compliance
To assist our clients with compliance matters, our consultancy arm, Allen & Gledhill Regulatory & Compliance, provides a range of services and solutions. Should you have any queries relating to compliance issues arising out of this development, please contact: