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Singapore – MAS Amends Securities And Futures (Reporting Of Derivatives Contracts) Regulations 2013.

16 April, 2014

 

Legal News & Analysis – Asia Pacific – Singapore  Capital Markets

 

Introduction

 

The Securities and Futures (Reporting of Derivatives Contracts) Regulations 2013 (the “Regulations”) came into operation on 31 October 2013. It was issued as part of a set of changes implemented by the Monetary Authority of Singapore (the “MAS”) in relation to the regulation of over-the-counter (“OTC”) derivatives. On 26 March 2014, the MAS made certain amendments to the Regulations, pursuant to the Securities and Futures (Reporting of Derivatives Contracts) (Amendment) Regulations 2014 which takes effect from 31 March 2014.


This update briefly describes the amendments to the Regulations, which comprise:

 

  • clarification of the definition of a “significant derivatives holder” (“SDH”) and the reporting requirements of an SDH (amended Regulation 6);
  • amendment to deferred reporting of counterparty information for a specified person (amended Regulation 11);
  • amendment of certain technical information to be reported under First Schedule of the Regulations; and
  • postponement of reporting commencement dates for interest rate derivatives and credit derivatives contracts traded in Singapore (amended Second Schedule of the Regulations).

 

Summary of Changes


Clarification of definition of SDH


A “specified person” who is a party to a “specified derivatives contract” must report certain prescribed information to either a licensed trade repository or a licensed foreign trade repository.


“Specified persons” includes banks, subsidiaries of banks, merchant banks, finance companies, insurers, approved trustees, and holders of capital markets services licenses.

 

Under the Regulations, the MAS has also prescribed SDHs as “specified persons”. Regulation 6(2) of the Regulations states that SDHs are persons who fulfil the following requirements on the last day of any quarter in a year:


(a) they do not fall under any of other category of “specified persons”;
(b) they are resident in Singapore; and
(c) the aggregate gross notional amount of specified derivatives contracts traded in Singapore and/or the aggregate gross notional amount of specified derivatives contracts booked in Singapore exceeds SGD 8bn. The aggregate gross notional amount is measured for the year ending on the last day of that quarter.


What Changed?


The amended Regulation 6(2) of the Regulations provides that a person only becomes a SDH on the last day of the next quarter after the day on which he fulfils the above conditions. Previously, Regulation 6(2) provided that such a person will become a SDH on the next day from the day on which he fulfils the above conditions.


This clarification comes as a relief to persons who trade in derivatives contracts and who may qualify to be a SDH because under the amended Regulations, they now have a quarter of a year from the time they meet the SDH criteria to prepare for derivatives reporting before actually being required to report.


The diagrams below set out the timelines for notification and trade reporting obligations on persons becoming or ceasing to be a SDH, respectively.

 

(Click to enlarge)

 

sdhchart1

 

sdhchart2

 

Amendment To Deferred Reporting Of Counterparty Information


Regulation 11 of the Regulations permits deferred reporting of counterparty information under certain conditions. A specified person need not report counterparty information, which would otherwise be reportable by 1 November 2014, if he meets the specified requirements. Such counterparty information will still need to be reported on or before 31 December 2014.


Under the amended Regulation 11 of the Regulations, the said masking of counterparty information is stated to apply to a specified person if:


(a) he is prohibited from reporting the counterparty information under the laws of certain jurisdictions (which are specified in the Fifth Schedule of the Regulations) or by any requirements of any authority of the jurisdiction specified in the Fifth Schedule; or


(b) where the laws of any jurisdiction, or the requirements of any authority of any jurisdiction allow him to report the counterparty information only with counterparty consent, and he has made reasonable efforts but was unable to obtain such consent.

 

What Changed?


In the previous version of the Regulations, the deferred reporting of counterparty information was stated slightly differently, such that the net result was to effect the above limb (b) only, and not the above limb (a). This change is welcomed, as a complete prohibition of reporting (i.e. limb (a)) would clearly be a stronger justification for deferred reporting when compared to a provision which permits reporting only if counterparty consent was obtained.


Amendment To First Schedule On Technical Information


The First Schedule of the Regulations contains the derivatives contract information which should be reported.


What Changed?


The First Schedule of the Regulations has been amended to clarify the information reporting requirements for UTI of uncleared contracts and usage of SWIFT BIC code if the counterparty does not have a LEI or pre-LEI.


Postponement Of Reporting Commencement Dates For Interest Rate Derivatives And Credit Derivatives Contracts Traded In Singapore


The Second Schedule of the Regulations contains a table on reporting commencement dates for different classes of specified derivatives. Previously, the Regulations provided for just three reporting dates which applied to different categories of specified persons: in respect of interest rate derivatives contracts and credit derivatives contracts, the reporting commencement date for banks and merchant banks was 1 April 2014; the reporting commencement date for bank subsidiaries, finance companies, insurers, approved trustees, and capital markets services licence holders was 1 July 2014; and the reporting commencement date for SDHs was 1 October 2014. It did not matter whether the interest rate derivatives and credit derivatives were booked or traded in Singapore.


What Changed?


The table on reporting commencement dates in the Regulations have been amended such that the reporting commencement dates for interest rate derivatives and credit rate derivatives traded in Singapore have been postponed for one year. That is, for interest rate derivatives and credit rate derivatives traded in Singapore, banks and merchant banks may start reporting only from 1 April 2015, bank subsidiaries, finance companies, insurers, approved trustees and capital markets services licence holders may start reporting only from 1 July 2015 and SDHs may start reporting only from 1 October 2015.

 

Comments


Overall, the amendments to the Regulations brought about by the Securities and Futures (Reporting of Derivatives Contracts) (Amendment) Regulations 2014 are welcomed, in particular, the postponement of trade reporting for interest rate derivatives and credit derivatives traded in Singapore pending further guidance from the MAS in this regard at a later juncture.


References


Securities and Futures (Reporting of Derivatives Contracts) Regulations 2013
Securities and Futures (Reporting of Derivatives Contracts) (Amendment) Regulations 2014

 

Rajah & Tann

 

For further information, please contact:

 

Regina Liew, Partner, Rajah & Tann
[email protected]


Larry Lim, Partner, Rajah & Tann
[email protected]

 

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