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May 22, 2018

MAS issued two consultation papers to improve business flexibility of market operators when establishing new centralized trading facilities and speed to market when launching new products. The consultations concern new multi-tier regime for market operators and the shift to a product notification regime. The proposals are part of the broader objectives of MAS to facilitate innovation in financial services by recognizing emerging new business models while safeguarding investor interests. Consultations end on June 22, 2018.

New multi-tier regime for market operators. MAS proposed to expand the existing Recognized Market Operators (RMO) regime from a single tier to three separate tiers (RMO Tier 1, RMO Tier 2, and RMO Tier 3) to better match regulatory requirements to the risks posed by different types of market operators. Tier 1 is for market operators that serve a limited base of retail investors, Tier 2 is for market operators that qualify under the existing RMO regime, and Tier 3 is for market operators that have a significantly smaller scale of business compared to more established operators under the existing RMO regime. MAS believes that a multi-tier RMO regime can better accommodate the emergence of new business models such as blockchain-based or peer-to-peer trading facilities and can lower the cost of entry for start-up operators. The current market operator regime is an application of MAS’ risk-based approach, matching regulatory requirements to the risks posed by market operators.

Shift to a product notification regime. MAS intends to replace the current approval regime for the launch of new derivatives products traded on exchanges or centralized trading facilities with a notification regime. To operationalize the new regime, MAS proposes for market operators to self-certify that the derivatives products to be traded comply with the MAS requirements and to notify MAS no less than one week prior to the product launch announcement. There will be no need to seek MAS approval and market operators will be better able to plan their launch timelines. As part of the self-certification process, market operators are required to identify and mitigate risks associated with the product launch. MAS will supervise market operators to check that they have appropriate internal controls and governance procedures to be able to assess and monitor the relevant product risks and mitigating measures. The shift to a product notification regime is in line with the international norms. Regulators such as U.S. CFTC, the Australian Securities and Investments Commission, and JFSA have similar product notification regimes for their exchanges and market operators.

Keywords: Asia Pacific, Singapore, Securities, Product Notification Regime, RMO Regime, Trading, Derivatives, Proportionality, MAS

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