Monetary Authority of Singapore Annual Report 2011/2012
Our Work

Regulating the Derivatives Market in Singapore

The global financial crisis showed that weaknesses in the over-the-counter (OTC) derivatives market could contribute to a build-up of systemic risk. In September 2009, the Group of 20 (G20) Leaders agreed in Pittsburgh to improve the regulation and supervision of OTC derivatives markets, as part of their efforts to strengthen the international financial system. The G20 also tasked the FSB to assess implementation regularly.

In July 2011, MAS announced that it would meet the objectives set by G20 as well as recommendations by the FSB on the regulation of OTC derivatives. In February 2012, MAS issued a consultation paper, setting out our policy intent on the regulation of OTC derivatives. The key proposals are: (a) Mandate the central clearing and reporting of OTC derivatives; (b) Extend the current regulatory regimes for market operators, clearing facilities and capital markets intermediaries to OTC derivatives; and (c) Introduce a new regulatory regime for trade repositories.

As commodity derivatives are currently regulated under the Commodity Trading Act administered by International Enterprise Singapore (IE Singapore), MAS also consulted on the transfer of regulatory oversight for commodity derivatives from IE Singapore to MAS. This will provide better synergy and alignment of regulatory approach across the major classes of derivatives.

Given the global nature of OTC derivatives trading, it is important that global regulatory standards are promulgated and implemented consistently. Various taskforces set up by standard-setting bodies such as the Committee on Payment and Settlement Systems, the International Organisation of Securities Commissions (IOSCO), the Committee on Global Financial System and FSB are working to develop standards to provide guidance and promote international harmonisation and consistency in implementation of these reforms. MAS, as an active participant of these international bodies, will take guidance from the work of these working groups, as we progressively implement the OTC derivatives reforms.