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The Monetary Authority of Singapore (MAS) issued for consultation today proposed regulations to require the trading of over-the-counter (OTC) derivatives on organised markets, to help improve market transparency. This requirement will complete MAS’ implementation of the G20 OTC derivatives reforms.
2 MAS proposes to impose obligations for the most globally-traded OTC derivatives, namely interest rate swaps denominated in US Dollar, Euro and Pound Sterling to be traded on organised markets, i.e. exchanges or other centralised trading facilities. These obligations will apply to banks whose gross notional outstanding OTC derivatives exceed $20 billion. MAS expects that about 80% of Singapore’s market in these products would have to be executed on organised markets following the commencement of the proposed trading obligations.
3 The US and the EU regulatory authorities have already implemented similar trading obligations for the same OTC derivatives products. MAS plans to seek equivalence determinations from the US and EU for exchanges and other centralised trading facilities in Singapore. This will allow these markets in Singapore to be used by US and EU market participants to fulfil their trading obligations.
4 Please click here to view the consultation paper on the proposed regulations on the mandatory trading obligations for OTC derivatives. We welcome interested parties to submit their comments to capital_markets@mas.gov.sg by 23 March 2018.
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Background
1 In 2009, the G20 and Financial Stability Board (FSB) agreed to implement a set of reforms to improve transparency, mitigate systemic risk, and protect against market abuse in the OTC derivatives markets. The mandatory trading of OTC derivatives is one of key reforms recommended by the G20 and FSB. MAS has since progressively implemented reforms in the areas of trade reporting, risk mitigation and margining of non-centrally cleared OTC derivatives, and mandatory clearing of OTC derivatives.
2 On 9 January 2017, the Securities and Futures Act was amended to give MAS powers to mandate the trading of OTC derivatives on organised markets, i.e. exchanges or other centralised trading facilities, and to extend the markets regime to OTC derivatives market operators. On 28 April 2017, MAS consulted on proposed regulations to operationalise the revised regulatory regime for market operators, including operators of OTC derivatives trading facilities.
3 In the US and the EU, the trading obligations were implemented in February 2014 and January 2018, respectively. The set of interest rate swaps denominated in US Dollar, Euro and Pound Sterling proposed by MAS are already subject to the US and EU trading obligations.
