On 31 August 2015, the Monetary Authority of Singapore (the “MAS”) issued a new “Notice on Financial Market Infrastructure Standards” (the “Notice”). The Notice came into effect on 31 August 2015 and applies to licensed trade repositories and approved clearing houses regulated under theSecurities and Futures Act (collectively defined as a “financial market infrastructure” (“FMI”)).
The MAS supervises the FMIs in accordance with the CPMI-IOSCO Principles for Financial Market Infrastructures (“PFMIs”), as set out under the Monograph on Supervision of Financial Market Infrastructures. Please click here for the full text of the PFMIs which is available on the website of the Bank for International Settlements (www.bis.org).
The FMIs facilitate the clearing, settlement, and recording of monetary and other financial transactions, such as payments, securities, and derivatives contracts (including derivatives contracts for commodities). While safe and efficient FMIs contribute to maintaining and promoting financial stability and economic growth, FMIs also concentrate risk. If not properly managed, FMIs can be sources of financial shocks, such as liquidity dislocations and credit losses, or a major channel through which these shocks are transmitted across domestic and international financial markets. The PFMIs are part of a set of 12 key standards that the international community considers essential to strengthen and preserve financial stability.
Some of the principles in the PFMI are set out in the Securities and Futures Act and subsidiary legislation issued thereunder. These include requirements relating to the handling of the money and assets of the customers of the FMIs, the FMIs’ business continuity plan and recovery and resolution plan, etc. The Notice sets out the remaining principles in the PFMI that an FMI has to comply with. Among others, an FMI is required to put in place procedures, policies and systems to manage its legal, credit, liquidity, general business, operational, custody and investment risks.