MAS proceeds with exemptions for approved exchanges and recognised market operators that provide certain clearing and settlement services

27 September 2023

The Monetary Authority of Singapore (“MAS”) has proceeded to implement regulations exempting an approved exchange (“AE”) or a recognised market operator (“RMO”) that provides certain clearing and settlement services from being regulated as an approved clearing house (“ACH”) or a recognised clearing house (“RCH”) under the Securities and Futures Act 2001. The exemption was implemented by way of the Securities and Futures (Clearing Facilities of Approved Exchanges or Recognised Market Operators) (Exemption) Regulations 2023 (“Regulations”), which took effect on 7 September 2023. On 8 September 2023, MAS published its response to feedback received from its consultation on the proposed exemption (“Response”).

Background

On 8 July 2022, MAS published a consultation paper seeking comments on its proposal to exempt, from regulation as ACHs or RCHs, AEs and RMOs that provide post-trade services of verifying the transactions conducted on the organised markets that they operate and/or calculating the obligations of parties under those transactions. MAS was of the view that as long as the AE or RMO did not act as a central counterparty and clear or settle trades on a centralised basis, it would not pose systemic risks to wider financial system. MAS also assessed that any marginal risks that may arise from such post-trade services could be addressed through MAS’ supervision of these entities as AEs or RMOs.

Exemption under the Regulations

Under the Regulations, the exemption applies to an AE or RMO that establishes or operates a clearing facility, if every transaction that is to be cleared or settled by that clearing facility is (i) executed on an organised market that is established or operated by the AE or RMO, (ii) not routed to an ACH or RCH, and (iii) only cleared or settled on the AE or RMO’s clearing facility by trade verification and/or calculation of obligation.

The Regulations further provide that an AE or RMO must notify MAS in writing of the fact that it has established or commenced operation of a clearing facility that provides such post-trade services and its reliance on the proposed exemption. In its Response, MAS clarified that the notification requirement applies to all AEs and RMOs, including existing RMOs, that avail themselves of the exemption.

Reference materials

The following materials are available on Singapore Statutes Online sso.agc.gov.sg and the MAS website www.mas.gov.sg: