10 February, 2016
On 18 January 2016, the Monetary Authority of Singapore (“MAS”) issued a Consultation Paper on Proposed Amendments to the Securities and Futures (Reporting of Derivatives Contracts) Regulations (“SF(RDC)R”) to implement certain changes to the over-the-counter (“OTC”) derivatives trade reporting regime in Singapore, including a new requirement to report commodity and equity derivatives contracts.
The MAS Consultation Paper may be obtained from MAS’ website here.
The trade reporting regime for OTC derivatives contracts came into force on 31 October 2013. Currently, interest rate, credit and foreign exchange derivatives contracts have to be reported to licensed trade repositories or licensed foreign trade repositories by specified financial institutions that are banks and merchant banks. Non- bank financial institutions have commenced these reporting obligations in respect of interest rate and credit derivatives contracts booked in Singapore.
In addition, on 1 July 2014, MAS issued a temporary relief from the requirement to report specified derivatives contracts to holders of a capital markets services licence in fund management or real estate investment trust (“REIT”) management (collectively, the “Asset Managers”) with managed assets of less than S$8 billion. The exemption was also extended to approved trustees (“AT”) in respect of collective investment schemes managed by Asset Managers who qualify for the relief or other fund management companies that are not otherwise subject to trade reporting obligations.
This Update looks at the key proposals in the MAS Consultation Paper. The deadline for public feedback is 15 February 2016. We would be pleased to assist with any feedback that our clients would like to make to MAS on the policy and regulatory proposals in the MAS Consultation Paper.
Reporting of Commodity and Equity Derivatives Contracts
We set out in the table below a brief summary of the proposal to extend the existing OTC derivatives trade reporting regime to commodity and equity derivatives contracts.
|
Type of derivatives contracts |
Scope of derivatives contracts subject to reporting requirement |
Information to be reported |
Implementation timeline for reporting obligations |
|
Commodity derivatives contracts |
Contracts booked and traded in Singapore which are forwards, swaps, and options that are related to commodities or commodity indices, or contracts |
Other than the common reportable |
For banks and merchant banks: 1 November |
|
with cash flows determined by reference to one or more commodities, excluding:
MAS Consultation Paper, exchange-traded commodity derivatives contracts should presumably be excluded from the trade reporting requirements to align with MAS’ approach to exclude exchange-traded products from such requirements. |
data fields that apply to all OTC derivatives contracts, MAS is proposing to introduce a new Part V of First Schedule to the SF(RDC)R which contains certain reportable data fields specifically applicable to commodity derivatives contracts. |
2016. |
|
|
Equity derivatives contracts |
Contracts booked and traded in Singapore which are: stocks or shares issued or proposed to be issued by a corporation or body unincorporated;
|
MAS is proposing that the reportable data fields for equity derivatives contracts be aligned with those applicable to credit derivatives contracts. |
For banks and merchant banks: 1 November 2016. For non-bank financial institutions: 1 November 2018. |
Other New Information to be Reported
New data fields on the booking location and the location of the trading desk
MAS proposes the inclusion of new data fields on booking location and trading desk location be reported for all derivatives asset classes, which are in line with those required by certain international regulators such as US Securities and Exchange Commission and the Hong Kong Monetary Authority. These data fields would support MAS’ analysis of the trade reporting data by differentiating between derivatives contracts that are booked in Singapore and those traded in Singapore. MAS proposes to commence the reporting of these fields on 1 July 2016.
Collateral information
MAS would like to seek feedback on implementing the reporting of collateral information, which was first proposed in the 9 July 2014 Consultation Paper on Draft Regulations for Reporting of Foreign Exchange Derivatives Contracts. The collateral information obtained from the reporting regime would provide MAS with relevant data for the implementation of margin requirements for non-centrally cleared OTC derivatives contracts, both for enforcing compliance of the margin requirements and for systemic risk surveillance purposes. MAS proposes to commence the reporting of collateral information on 1 November 2016.
Exemptions from Reporting Obligations
The table summary below sets out the scope and conditions for the proposed exemptions available to certain specified financial institutions.
|
Proposed exemption |
Scope and conditions for proposed exemption |
Remarks |
|
Exemption for certain non- bank financial institutions with low level of OTC derivatives activity |
Any of the following financial institutions who enters into a specified derivatives contract traded in or booked in Singapore and has an annual aggregate gross notional amount of specified derivatives contracts not exceeding S$5 billion, shall be exempted from the OTC derivatives trade reporting requirements in respect of the specified derivatives contract:
|
The existing exemption for Asset Managers with managed assets not exceeding S$8 billion would remain available in parallel with this proposed exemption until 31 October 2017. |
|
Exemption for ATs and Licensed Trust Companies (“LTCs”) |
Any of the following financial institutions who enters into a specified derivatives contract traded in or booked in Singapore shall be exempted from the OTC derivatives trade reporting requirements in respect of the specified derivatives contract:
|
|
|
Exemption in respect of derivatives contracts transacted with retail investors |
Any of the following financial institutions who enters into a specified derivatives contract traded in or booked in Singapore with retail investors shall be exempted from the OTC derivatives trade reporting requirements in respect of the specified derivatives contract:
|
For the purposes of risk monitoring and supervision, MAS would be able to obtain data on these transactions at the aggregate level, as part of its regulatory and supervisory regime. |
MAS would still require entities excluded from reporting requirements, such as certain non-bank financial institutions, to submit information regarding their trade activity on a periodic basis. MAS will require non-bank financial institutions to make periodic submissions of certain aggregated information relating to derivatives contracts, the format and frequency of which will be set out in due course.
Reporting Commencement Dates
Please click here and go to page 4 to see the summary table which sets out the reporting commencement dates in respect of each class of Specified Person based on the MAS Consultation Paper.
For further information, please contact:
Rosabel Ng, Partner, WongPartnership
rosabel.ng@wongpartnership.com
