SGX Maintains A Robust Framework As A Self-Regulatory Organisation

1. We refer to the letter from Mr Mak Yuen Teen entitled “Thoughts on SGX’s regulatory stance”, published in the Business Times Singapore on 23 December 2008.

2. Singapore is not unique in having a listed exchange that is also the frontline regulator responsible for preserving a fair, orderly and transparent marketplace. Other leading Exchanges, listed or otherwise, are also commercial entities that promote their businesses and regulate their markets.

3. Mr Mak cited the Australian Securities Exchange (ASX) as an example. ASX deals with regulatory conflict by establishing a separate subsidiary to manage day-to-day supervisory functions. Overall policy is still decided by a Policy Committee which includes ASX executives. The Board of the supervisory subsidiary is made up of some directors who hold concurrent directorship on the main board of ASX.

4. The International Organisation of Securities Commissions (IOSCO) has endorsed the World Federation of Exchanges (WFE) view that there is no ‘one size fits all’ solution and that regulatory responses may vary.

5. In Singapore, we have a Regulatory Conflicts Committee (RCC) made up of independent directors within the SGX Board. Its function is to oversee the handling of regulatory conflicts within SGX and make decisions on specific cases of SRO conflicts as required. The regulatory arm of the SGX as contained in Risk Management and Regulatory Group (RMR) reports on conflicts governance and resourcing to the RCC, which in turn accounts for its actions annually to the Monetary Authority of Singapore (MAS), our statutory regulator.

6. SGX gives highest priority to developing an enduring market place through not just commercial capabilities, but also regulatory excellence.

7. SGX’s regulatory and commercial objectives are not divergent. High regulatory standards are the cornerstone for maintaining market integrity and confidence. SGX recognises the importance of managing both perceived and actual conflicts of interest as a self-regulatory organisation (SRO).

8. We have established a robust framework of checks and balances. An internal Handbook covering the management of SRO conflicts for both commercial and regulatory functions of the Exchange, supported by comprehensive training and awareness, reinforces our SRO governance framework. Details can be found in our annual reports and our corporate website.

9. The entire SRO conflicts governance framework and practice was reviewed by an external expert first in June 2006, and again in May this year (please refer to SGX Annual Reports for FY2007 and FY2008). The first review concluded that SGX’s SRO conflicts governance was adequate and had positive findings for ‘work in progress’. The more recent 2008 review recognises SGX’s maturity in this area. All recommendations made have been accepted and implemented. These reports were also submitted to MAS.

10. The Exchange, as the frontline regulator, exercises a range of enforcement actions from private warnings to published comment and reprimand on errant listed companies and SGX members and registered representatives. In some cases, there may be the involvement of MAS for civil action or the Commercial Affairs Department of Singapore (CAD) for criminal prosecution. The publication of any regulatory issue is a matter of regulatory judgement, taking into account all the relevant facts and circumstances in any given case.

11. The appropriate degree and form of disclosure, as well as our SRO governance framework, can evolve with the development of the market. We undertake the consideration of these questions from time to time, with feedback from the industry and market participants. The most recent review of the SRO framework in May 2008 recommended no change in our SRO structure.




MS YEO LIAN SIM
SENIOR EXECUTIVE VICE PRESIDENT
HEAD, RISK MANAGEMENT AND REGULATION GROUP

5 January 2009