28 July 2022
On 8 July 2022, the Monetary Authority of Singapore (“MAS”) issued a consultation paper seeking feedback on a proposed exemption for an approved exchange (“AE”) or a recognised market operator (“RMO”) that provide certain clearing and settlement services from being regulated as an approved clearing house (“ACH”) or a recognised clearing house (“RCH”) under the Securities and Futures Act 2001 (“SFA”). The consultation closes on 9 September 2022.
Part 3 of the SFA regulates persons that establish or operate a clearing facility or hold themselves out as operating a clearing facility, as an ACH or RCH, unless otherwise exempted. This serves to promote safe and efficient clearing facilities and reduce systemic risks.
MAS has observed the introduction of new business models in which AEs or RMOs, in the course of operating their market platforms, also provide post-trade services such as verifying the transactions conducted on the organised markets that they operate and calculating the obligations of parties under those transactions, before such transactions are cleared or settled bilaterally between the transacting parties. Under the current SFA regime, an AE or RMO that provides such services may be considered to be establishing or operating a clearing facility, or holding itself out as operating a clearing facility, and thus be subjected to regulation by MAS as an ACH or RCH.
MAS is of the view that such services conducted by AEs or RMOs do not increase the systemic risks posed by such entities to the wider financial system. MAS thus proposes to exempt AEs and RMOs that conduct such services from regulation as clearing facilities, by way of a class exemption under section 49(6) of the SFA. With this exemption, an AE or RMO will not, by virtue of providing such services alone, be additionally subject to regulation by MAS as an ACH or RCH. This amendment would facilitate the provision of such services without imposing additional regulatory costs on the AEs or RMOs, which may not be commensurate with the impact on systemic risks.