Corporate & Securities Singapore Client Alert January 2016 For further information please contact Stephanie Magnus +65 6434 2672 Stephanie.Magnus@bakermckenzie.com Eunice Tan +65 6434 2552 Eunice.Tan@bakermckenzie.com Liew Ying Yi +65 6434 2531 YingYi.Liew@bakermckenzie.com Baker & McKenzie.Wong & Leow 8 Marina Boulevard #05-01 Marina Bay Financial Centre Tower 1, Singapore 018981 www.bakermckenzie.com MAS Consults on Amendments to Regulations to Complete the Implementation of the OTC Derivatives Trade Reporting Regime On 18 January 2016, the Monetary Authority of Singapore (the "MAS") issued a Consultation Paper on Proposed Amendments to the Securities & Futures (Reporting of Derivatives Contracts) Regulations (the "Consultation Paper"). The mandatory trade reporting regime for OTC derivatives commenced on 31 October 2013. Since then, the reporting obligations in relation to interest rate, credit and foreign exchange derivatives contracts have started to kick in for specified persons (including licensed banks, merchant banks, finance companies, insurers, approved trustees, capital markets services ("CMS") licence holders and significant derivatives holders. This Consultation Paper now seeks to complete the implementation of the OTC derivatives trade reporting regime by (i) extending these requirements to commodity and equity derivative contracts; (ii) introducing new data fields for all derivatives asset classes; and (iii) refining the reporting obligations for certain non-bank financial institutions ("FIs") in Singapore. For further information on the reporting framework, please see our earlier update here. MAS is seeking feedback on the following key proposals: 1. Reporting of Commodity and Equity Derivatives Contracts MAS proposes to extend the reporting obligations to: a. Commodity derivatives contracts, which will: o include all forwards, swaps, and options that are related to commodities or commodity indices, or contracts with cash flows determined by reference to one or more commodities; o but exclude: physically-settled commodity derivatives contracts that are entered into for commercial purposes; and certain commodity sale and purchase agreements which may contain some form of optionality, where such contracts are executed for commercial purposes and intended for physical settlement. b. Equity derivatives contracts, which will refer to: o rights, options or derivatives related to stocks or shares issued or proposed to be issued by a corporation or body unincorporated; o contracts related to equities or equity indices; or o derivatives of a unit in a business trust. Exchange-traded equity derivatives contracts (e.g. structured warrants) will be excluded. A new section is proposed to prescribe the data fields required for commodity derivatives contracts. For equity derivatives contracts, MAS proposes that the required data fields be aligned with those for credit derivatives contracts. 2 Client Alert January 2016 2. Additional Data Fields MAS proposes to require new data fields, specifically, the booking location and the trader desk location for all derivative asset classes. MAS also seeks feedback on implementing the reporting of collateral information which is aimed at facilitating the enforcement of compliance with margin requirements and for systemic risk surveillance purposes. 3. Reporting requirements for non-bank FIs a. Reporting obligations only for active non-bank FIs in OTC derivatives The temporary relief which MAS previously provided for CMS licence holders in fund management or real estate investment trust management (collectively, the "Asset Managers") with managed assets of less than S$8 billion (and the approved trustees in respect of the collective investment schemes managed by the Asset Managers who qualify for such relief) will be lifted from 31 October 2016. Instead, Asset Managers, along with other non-bank FIs (including subsidiaries of banks incorporated in Singapore, insurers and all CMS licence holders), will be subject to reporting requirements only if their annual aggregate notional amount for OTC derivatives transactions exceed S$5 billion. b. Exemption for all Approved Trustees and Licensed Trust Companies MAS proposes to exempt both approved trustees and licensed trust companies from the reporting requirements given the practical challenges in complying with the reporting obligations, which arises from the largely administrative nature of their roles. c. Exclusions for reporting derivatives contracts transacted with retail investors MAS proposes to exempt brokers and banks from having to report derivative transactions where their counterparties are retail investors (i.e. non-accredited or noninstitutional investors), recognising that transactions carried out with these investors are often relatively small and therefore the risk to the overall system is low. d. Proper record keeping expected of all non-bank FIs While certain non-bank FIs may be exempted from reporting, they should continue to ensure proper record keeping of their OTC derivatives activities. MAS would still require entities excluded from reporting requirements to submit information regarding their trade activity on a periodic basis. The format and frequency of such submissions will be set out in due course for each class of FI. 4. Implementation Timeline MAS has proposed the following implementation schedule: Date New Reporting Phases 1 July 2016 Reporting of booking location and trader desk location data fields by all specified persons (banks, non-bank FIs and significant derivatives holders) for interest rate, credit and foreign exchange derivatives. 1 November 2016 Reporting of commodity and equity derivatives contracts (including the proposed additional fields) booked and traded in Singapore by banks and merchant banks Reporting of collateral data fields by banks and merchant banks for all specified derivatives contracts (including commodity and equity derivative contracts) Reporting of collateral data fields by non-bank FIs and significant derivatives holders for interest rate and credit derivatives contracts booked in Singapore. 3 Client Alert January 2016 ©2016. All rights reserved. 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Prior results do not guarantee a similar outcome. 1 November 2017 Reporting of interest rate derivatives and credit derivatives (including the proposed additional fields) traded in Singapore by: o All finance companies; o Subsidiaries of banks incorporated in Singapore, insurers and holders of CMS licenses, with annual aggregate gross notional amount of specified derivatives contracts of more than S$5 billion; and o All significant derivatives holders ("Non-Bank FIs"). 1 November 2018 Reporting of equity derivatives, commodity derivatives and foreign exchange derivatives booked and/or traded in Singapore (including the proposed additional fields) by Non-Bank FIs. MAS is inviting comments and views by 15 February 2016. If you have any comments, please contact us. For further details on the proposals, please refer to this link: Consultation Paper.