Introduction

MAS has issued a consultation paper on its proposed Securities and Futures (Reporting of Derivatives Contracts) (Amendment) Regulations 2014 (“SF(RDC)R 2014”) to require the reporting of foreign exchange (“FX”) derivatives contracts under the Securities and Futures Act, amongst other proposed changes. The consultation closes on 8 August 2014.

As part of MAS’ policy intent to regulate and to require trade reporting of over-the-counter derivatives, the Securities and Futures (Reporting of Derivatives Contracts) Regulations 2013 (the “Regulations”) were previously introduced on 31 October 2013 (and subsequently amended on 31 March 2014). The Regulations had earlier required interest rate and credit derivatives contracts (“IRCs” and “CRCs” respectively) to be reported.

Which Foreign Exchange Derivatives Contracts Need To Be Reported

MAS proposes that FX derivatives contracts traded or booked in Singapore be reportable. This will cover forwards, swaps and options related to currencies or currency indices, or whose cash flows are determined by reference to currencies or currency indices, including non-deliverable forwards, non-deliverable options and exotic options, but will not include spot transactions settled by the actual delivery of the underlying thing within two business days of execution.

Who And When?

Only banks and merchant banks are prescribed for the reporting of FX derivatives contracts at this time. The reporting commencement dates for:

• contracts booked in Singapore is 1 April 2015; and
• contracts traded in Singapore is 1 October 2015.

The diagram below sets out the timelines for the reporting of derivatives contracts for the different entities concerned*:

(Click to enlarge)

* References to Parts I, IA, IB, II, III and/or IV in the diagram above are a reference to the relevant Parts of the First Schedule to the SF(RDC)R 2014.

MAS will assess the readiness of specified non-bank entities and significant derivatives holders (“SDHs”) to report FX derivatives contracts at a later stage.

Definition Of “Traded In Singapore”

MAS further proposes to amend the existing definition of “traded in Singapore” under the Regulations to tie it to the execution of the transaction to a trader (as opposed to a trading desk) who is generally employed in Singapore, regardless of the trader’s physical location at the time of the transaction. It is proposed that a trader would be considered to be employed in Singapore if he conducts, or is authorised to conduct, on behalf of a specified person, activities relating to the execution of derivatives contracts in Singapore for more than 46 days of the preceding calendar quarter.

Further Information That Needs To Be Reported

The list of data fields within the First Schedule of the SF(RDC)R 2014 is proposed to beexpanded to include additional information for all asset classes of derivatives contracts,including mark-to-market valuation and collateral information, as set out in Parts IA andIB of the First Schedule.

In relation to FX derivatives contracts, IRCs and CDCs booked in Singapore, banks and merchant banks in Singapore would have to report the information set out in:

• Part IA of the First Schedule to the SF(RDC)R 2014 (“Part IA”) by 1 April 2015; and
• Part IB of the First Schedule to the SF(RDC)R 2014 (“Part IB”) by 1 October 2015.

The reporting obligations in respect of the additional data fields for specified non-bank entities and SDHs across all asset classes will be phased in with transition periods of 6 months (for Part IA information) and 12 months (for Part IB information) from the implementation of the relevant regulations.

Deferred Reporting In Certain Cases

Regulation 11 of the Regulations permits deferred reporting of counterparty information under certain conditions. MAS proposes to extend the “masking” relief to 31 December 2015 for certain specified jurisdictions and for the European Union countries to be removed from the list once the SF(RDC)R 2014 comes into operation.

References

1. Consultation Paper on Draft Regulations for Reporting of Foreign Exchange Derivatives Contracts

2. Draft Securities and Futures (Reporting of Derivatives Contracts) (Amendment) Regulations 2014

For further information, please contact:

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

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

Charmaine Tien, Partner, Rajah & Tann
[email protected]

Ruth Lin, Partner, Rajah & Tann
[email protected]

Rajah & Tann Banking & Finance Practice Profile in Singapore

Homegrown Banking & Finance Law Firms in Singapore