Between 1 July 2015 and 31 July 2015, the Monetary Authority of Singapore (the “MAS”) consulted on the requirements for the mandatory clearing of over-the-counter (“OTC”) derivatives contracts. The MAS Consultation Paper on “Draft Regulations for Mandatory Clearing of Derivatives Contracts” set out a new draft Securities and Futures (Clearing of Derivatives Contracts) Regulations 2015 (the “SF(CDC) Reg”) that provide for the proposed implementation details of the requirements relating to the mandatory clearing of OTC derivatives contracts. The proposals in the Consultation Paper concern, among other things, the types of OTC derivatives contracts subject to mandatory clearing, persons who are subject to or exempt from the mandatory clearing obligations, circumstances under which clearing is mandatory and the timeline for implementation.

For a start, the MAS proposes to mandate the clearing of interest rate swaps (“IRS”). The mandatory clearing obligations will only apply to banks whose aggregate outstanding gross notional amount of the total derivatives contracts booked in Singapore for each of the past four consecutive calendar quarters exceeds S$20 billion.

Background information

By way of background, in November 2012, the following requirements relating to the regulatory framework for OTC derivatives contracts were put in place in the Securities and Futures Act (the “SFA”):

  • mandating central clearing of OTC derivatives contracts on regulated central counterparties (the “CCP”);
  • mandating reporting of OTC derivatives contracts to regulated trade repositories (“TRs”); and
  • establishing the regulatory regimes for market operators, clearing facilities, TRs and market intermediaries for OTC derivatives contracts.

The requirements for mandatory reporting of OTC derivatives contracts are now in force. From 3 June to 3 July 2015, the MAS conducted a separate public consultation on the proposed requirements of the new regulatory framework for OTC intermediaries.

Reference materials

The following materials are available from the MAS website www.mas.gov.sg: