MAS' Response to SIBA Equity Derivatives and Structured Products Taskforce Findings
Singapore, 27 June 2006...The Monetary Authority of Singapore (MAS) today announced its response to recommendations made by the Singapore Investment Banking Association Equity Derivatives and Structured Products Taskforce.
2 In the immediate term, MAS will take the following steps:
(a) Study further how our regulatory framework can be made more flexible to achieve alignment with market developments and accommodate product innovation;
(b) Consider whether to introduce a prospectus exemption based on a "knowledge test" for investors who have a certain level of financial expertise;
(c) Facilitate the listing of structured warrants on foreign exchange, interest rates and commodities to complement the structured warrants on shares and stock indices currently listed on the SGX; and
(d) Work with SIBA and the Institute of Banking and Finance (IBF) to enhance knowledge of equity derivatives and structured products in the Capital Markets and Financial Advisory Services (CMFAS) Examination.
3 MAS will also work closely with SIBA, The Singapore Exchange (SGX) and other industry partners to look into further developing and implementing the Taskforce's recommendations. The consolidated response to the Taskforce's recommendations can be found in the Annex A (29.1 KB) .
4 The SIBA Taskforce (Taskforce) was formed in October 2005 to study and recommend changes that will further develop the equity derivatives and structured products market in Singapore. The SIBA Taskforce comprised a wide representation of industry players from both issuers and market intermediaries such as financial institutions and brokers, as well as representatives from the investment community.
5 The following issues were considered by the SIBA Taskforce:
a) Overview of the market including existing and future products, market size and potential, as well as key drivers of demand and supply;
b) Market participants and their location;
c) Current regulatory and tax framework and their conduciveness to market development;
d) Manpower requirements such as skill or training gaps; and
e) Infrastructure including front, middle and back office as well as exchange, clearing and settlement functions.
6 In the report, the Taskforce recognised that Singapore has come a long way in terms of developing its equity derivatives and structured products markets. However, there remains untapped potential. The Taskforce believed significant opportunities exist to develop the domestic markets further as well as allow Singapore to expand its position as an important international financial centre. It identified a three-pronged approach: first, to build a liquid international market here that is efficient, transparent and orderly; second, to establish Singapore as a centre for innovative products; and third, to ensure long term sustainability where market participants are adequately educated and informed on the workings of such financial products.
7 The Taskforce made a number of recommendations including:
i) broadening the product class of investment products permitted to be listed;
ii) lowering the minimum investment threshold for purposes of prospectus exemption;
iii) enhancing of examinations for trading representatives;
iv) introducing a fee structure that encourages the introduction of warrants and other equity derivatives / structured products;
v) making technological enhancements to the trading system; and
vi) improving retail and institutional investor education.