26 November 2014

The Editor
Business Times

Dear Editor

We refer to the articles “SMCCA faces hurdle in membership drive” (The Business Times, 4 November 2014) and “MTP will lower liquidity, raise listing cost: SMCCA” (The Business Times, 16 October 2014).

Under Singapore’s regulatory framework, SGX acts as the frontline regulator for issuers listed on the SGX-ST. Under section 16 of the Securities and Futures Act (SFA), SGX-ST, as an approved exchange has the obligation, amongst other things, to maintain listing rules that make satisfactory provision for a fair, orderly and transparent market for trading of securities, and to enforce compliance with its listing rules.

While the listing rules operate as a contract between SGX-ST and the issuers, SGX-ST’s ability to enforce its rules is backed by statute. Section 25 of the SFA provides for the power of court to order observance of listing rules.  This means that SGX’s listing rules have statutory effect.

The model, where the approved exchanges operate as self-regulatory organisations (SRO), is not unique to Singapore.  Many major jurisdictions, including the United States, Australia and Hong Kong, have adopted self-regulation by stock exchanges, with varying degrees of regulatory responsibilities.  The International Organisation of Securities Commissions (IOSCO) has also acknowledged that SROs are valuable in helping statutory regulators achieve their securities regulation objectives.  

SGX, as an SRO for the securities market, performs regulatory functions in three areas, namely listings, member admission and supervision, and market surveillance.  As the statutory regulator of Singapore’s capital markets, MAS exercises close supervision of SGX's regulatory functions to ensure that SGX is performing its regulatory functions competently and responsibly. These include regular inspection of SGX and approving any changes to SGX’s business and listing rules.

While we acknowledge that the extent of self-regulation by exchanges is evolving, we should not frame the debate as a binary choice between full statutory regulation or exchange self-regulation. It is an issue of calibration taking into account our operating environment, operational efficiencies and where best each regulatory function should reside. The current arrangement allows SGX to react nimbly to market developments while preserving its regulatory objectives. At the same time, SGX’s interest to preserve its brand value as a fair and sound marketplace acts as a form of discipline to carry out its regulatory role diligently.

We note that the perception of conflicts of interest could be more pertinent in the function of listings. In this regard, the proposed establishment of the three independent listing committees – the Listings Advisory Committee, the Listings Disciplinary Committee and the Listings Appeals Committee, will complement the work performed by SGX as the listings authority. SGX is currently considering the feedback from its public consultation on the implementation details for the establishment of the listing committees, and will be publishing the finalised proposals in due course.

Bey Mui Leng (Ms)
Director (Corporate Communications)
Monetary Authority of Singapore