18 October, 2018
On 28 September 2018 and 1 October 2018, the Monetary Authority of Singapore ("MAS") published its Response to Feedback Received on the Consultation Papers on Draft Regulations pursuant to the Securities and Futures Act ("SFA").
This update is not intended to be a summary of the forthcoming regulatory changes. Rather, it runs through certain aspects of the first MAS Response and considers, in particular, the new Securities and Futures (Organised Markets) Regulations 2018 (the "Organised Markets Regulations") and Securities and Futures (Financial Benchmarks) Regulations 2018 (the "Financial Benchmarks Regulations").
Securities and Futures (Organised Markets) Regulations
The new Organised Markets Regulations will, with the exception of Regulation 12, come into force on 8 October 2018.
The Organised Markets Regulations will therefore supersede the existing Securities and Futures (Markets) Regulations 2005 from 8 October 2018.
Regulation 12 of the Organised Markets Regulations came into force on 1 October 2018 and requires an approved exchange (e.g. SGX) to determine the aggregate volume of short sell orders and publish such aggregate volume on its website. For instance, the information from SGX for 1 October 2018 is available here.
In the MAS Response, MAS clarified (among other things) that:
- the definition of "organised market" is intended to be broadly consistent with the definition of "market" in the existing Guidelines on the Regulation of Markets;
- price discovery and formation is a key element of an organised market and facilities that do not contribute to price discovery are not intended to be captured; and
- the exemption for entities that facilitate the matching of trades apply only to:
- commodity OTC derivative contracts; and
- listed commodity block futures contracts,
where the participants consist of only:
- accredited investors;
- expert investors; and
- institutional investors.
This exemption is provided for in Regulation 27 of the Organised Markets Regulations.
It was therefore recognised that certain dealers may be subject to the regulatory regime for organised markets and they are encouraged to engage MAS to discuss their licensing requirements.
Securities and Futures (Financial Benchmarks) Regulations
The new Financial Benchmarks Regulations will, with the exception of Regulations 9(2), 13(2) and 21, come into force on 8 October 2018.
Regulations 9(2), 13(2) and 21 will come into operation on 8 October 2020.
- As expected, SIBOR and SOR have been designated by the Securities and Futures (Designated Benchmarks) Order 2018 as "designated benchmarks".
- SIBOR and SOR are presently administered by ABS Benchmarks Administration Co Pte Ltd ("ABS") and MAS
- will continue to engage with ABS to facilitate their authorisation and the transition to regulatory compliance.
- Regulated financial institutions (e.g. licensed banks) which are existing benchmark submitters must notify MAS within three months from the commencement of the regime of its activity as a submitter – even if it is an exempt benchmark submitter that is not otherwise required to apply to be an authorised benchmark submitter.
- In fact, for "new" exempt benchmark submitters, Regulation 18(2) of the Financial Benchmarks Regulations requires the exempt person to lodge with the MAS a notice that it intends to carry on a business or activity as a benchmark submitter at least 14 days before commencing to do so.
- Even if a regulated financial institution qualifies as an exempt benchmark submitter, it is subject to certain obligations under the Financial Benchmarks Regulations, including obligations to notify MAS of certain matters, submit periodic reports to MAS and maintain proper records of each representative. The term "representative" captures a person who carries out the activity of providing information in relation to a designated benchmark, other than work ordinarily performed by accountants, clerks or cashiers. Importantly, it is not limited to the person who is the final submitter of information.
For further information, please contact:
Kai Loon Loh, Ashurst
kailoon.loh@ashurst-adtlaw.com
