In Edition 4, we highlighted the new derivatives trade reporting regime. The Monetary Authority of Singapore (MAS) introduced a phase-in approach for the reporting regime, through different reporting commencement dates based on asset classes and types of institutions dealing in derivatives. The reporting regime first took effect on 31 October 2013 and since then, reporting obligations in relation to interest rate, credit and foreign exchange derivatives contracts have started to kick in for specified persons (including insurers).
On 18 January 2016, the MAS issued a Consultation Paper on Proposed Amendments to the Securities & Futures (Reporting of Derivatives Contracts) Regulations (the Consultation Paper). This Consultation Paper sought 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 in Singapore.
MAS sought feedback on the following key proposals:
- Reporting of Commodity and Equity Derivatives Contracts
MAS proposes to extend the reporting obligations to:
- Commodity derivatives contracts, which will:
- 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;
- but exclude:
- physically settled commodity derivatives contracts that are entered into for commercial purposes; and
- certain commodity sale and purchase agreements that may contain some form of optionality, where such contracts are executed for commercial purposes and intended for physical settlement.
- Equity derivatives contracts, which will refer to:
- rights, options or derivatives related to stocks or shares issued or proposed to be issued by a corporation or body unincorporated;
- contracts related to equities or equity indices; or
- 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.
- 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.
- Reporting Requirements for Non-Bank FIs
- Reporting Obligations Only for Active Non-Bank FIs in OTC Derivatives
The temporary relief which MAS previously provided for CMS license holders in fund management or real estate investment trust management (collectively, the asset managers) with managed assets of less than SGD8 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.
- 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.
- 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 non-institutional investors), recognizing that transactions carried out with these investors are often relatively small and therefore the risk to the overall system is low.
- 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.
- Implementation Timeline
MAS has proposed the following implementation schedule:
Click here to view table
Public consultation on the proposals closed in February 2016. MAS will be issuing its feedback to responses received from the public and confirming the proposals that will be implemented.
Please refer to this link for a copy of the Consultation Paper