28 June 2018

In its continuing efforts to facilitate innovation in financial services by recognising emerging new business models while safeguarding investors’ interest, the Monetary Authority of Singapore (“MAS”) has issued two consultation papers on (i) a new multi-tier regime to improve market operators’ business flexibility when establishing new centralised trading facilities, and (ii) the shift to a product notification regime for new derivative products.

Issued on 22 May 2018, the two consultation papers are:

Both consultations closed on 22 June 2018.

New multi-tier regime for market operators

MAS currently regulates Singapore-incorporated market operators as AEs and RMOs. Systemically-important market operators are regulated as AEs and are subject to a higher level of statutory obligations, while other market operators are regulated as RMOs.

With the emergence of new business models in trading platforms, including trading facilities that make use of blockchain technology, or platforms that allow peer-to-peer trading without the involvement of intermediaries, MAS is reviewing the regulatory framework for market operators to ensure it continues to meet the demands of the changing landscape, in particular to lower the cost of entry for players that do not pose systemic or system-wide risks. A calibrated regulatory regime would also enable new players to better transit from a start-up to a larger RMO, and finally, to an established AE. MAS therefore proposes to expand the current RMO regime from a single tier to three separate tiers that would better match regulatory requirements to the risks posed by different types of market operators, namely:

  • RMO Tier 1: A new tier targeted at market operators with limited access to Singapore-based retail investors.
  • RMO Tier 2: Targeted at market operators that qualify under the current RMO regime. The regulatory requirements for this tier will be the same as those under the existing RMO regime. Under the proposed three tier framework, market operators that are currently authorised as RMOs will be re-classified under RMO Tier 2.
  • RMO Tier 3: A new tier targeted at market operators that have a significantly smaller scale of business compared to more established operators under the current AE and RMO regime.

Shift to product notification regime

Currently, AEs and locally-incorporated RMOs (together, “Relevant Entities”) seeking to list or de-list derivative products must obtain MAS’ approval on a product-by-product basis. Such products include futures contracts and options contracts. When the relevant provisions of the Securities and Futures (Amendment) Act 2017 (“Amendment Act”) come into force, the product approval regime will be replaced by a notification regime.

Under the new notification regime, MAS will issue a Notice setting out the criteria and process it will use to assess product listings. In this regard, MAS is seeking comments on a draft “Notice on Listing, De-Listing or Trading of Relevant Products on an Organised Market of an Approved Exchange or a Recognised Market Operator Incorporated in Singapore”.

Relevant Entities will be able to list new products once they have self-certified that the specifications of the products to be traded meet the criteria set out in the Notice, and all relevant risks have been adequately addressed. Relevant Entities will also be required to notify MAS no less than one week prior to the product launch announcement. The notification framework will also require an annual self-certification by a Relevant Entity that it continues to have the appropriate controls and governance procedures to manage and control risk pertaining to
its listed products.

Reference materials

The following materials are available on the MAS website www.mas.gov.sg:

 

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