Derivatives Transaction Reporting: What do Singapore’s proposals mean for firms regulated elsewhere?

by Reed Smith
Contact

The Monetary Authority of Singapore (MAS) has recently published a consultation paper setting out its proposals for transaction reporting requirements (the Securities and Futures (Reporting of Derivatives Contracts) Regulations 2013 or SF(RDC)R) (the Consultation).

This client alert does not analyse the proposals in detail, but highlights questions for market participants, who are already deep in the midst of regulatory response planning in respect of Dodd-Frank and EMIR, to factor into their transaction reporting project plans.

Overview

This Consultation is a continuation of the regulatory reform package which began with the Securities and Futures (Amendment) Act on 15 November 2012. This was Singapore’s response to the G20 commitments with respect to regulatory requirements for OTC derivatives and mandatory clearing for standardised transactions. These proposals also follow on from the response of the US under Dodd-Frank and the EU under EMIR respectively.

The proposed reporting requirements are subject to phased implementation according to:

  • asset class (with interest rate and credit derivatives first);
  • categorisation of the reporting party; and
  • whether the trade is entered into on or after the date that the reporting obligation comes into effect (but there is a backloading requirement).

So far, so familiar to anyone who is grappling with Dodd-Frank or EMIR.

However, it seems that Singapore has chosen to propose a more US, as opposed to EU, style of reporting requirement. For example, there is no proposed reporting requirement for non-financials under a specified threshold and no extension of the reporting requirement to exchange-traded derivatives (although non-financials remain subject to a reporting requirement in respect of modification and termination of transactions they have already reported once over the threshold).

That said, there are also areas where the Singapore proposals diverge from the US requirements, such as whether to require a party to indicate if a trade is entered into for hedging as opposed to speculative purposes. It remains to be seen whether the market regards MAS’s proposals are worth the wait and whether letting other regional regulators show their hand before unveiling their own proposals will prove to be a shrewd move by MAS in the long run.

What is clear is that, for entities who are already dealing with reporting requirements in other jurisdictions, the differences between the Singapore proposals and similar requirements in other regions, particularly the EU, could lead to additional operational complexity and practical issues.

Key Issues to Consider

Differing ongoing monitoring and notification requirements

  • Singapore non-financial entities (or potentially even Singaporean branches of US or EU non-financial entities) will be subject to a local threshold requirement. Clearly, for these types of entity this presents yet another threshold to calculate, measure and monitor.

Intra-group transactions

  • The Consultation does not mention intra-group transactions. So query whether the reporting requirements apply to intra-group transactions at all?
  • If not, do intra-group transactions need to be taken into account in threshold calculations? Significant clarification is required on this and other issues around the threshold calculation as this could be the pivotal question in determining whether or not reporting requirements apply.

Group/regional aggregator concerns

  • The differences between regional approaches to regulation expose large groups, in particular, to the risk of conflicting treatments in multiple jurisdictions.
  • Large groups routinely transfer risk on a cross-border basis, centralising it in global or regional risk aggregators. If a group has a risk aggregator located in Singapore, these arrangements will need to be reviewed in the light of this and further forthcoming MAS consultations on derivative market reform.

Conflicting regimes

  • The Consultation briefly outlines the idea of MAS adopting a “substitutive compliance” approach in cases where there would otherwise be duplicative regulation (but this will depend on international consensus). If substitutive compliance is a solution, when can it be relied upon?
  • If the regimes’ reporting requirements commence at different points in time, will parties have to comply with the earliest without recourse to substitutive compliance?
  • What is the situation where the counterparties are subject to different reporting requirements (e.g. with respect to timing, phase-in etc)?

Acting as agent

  • Some entities are not currently subject to reporting requirements, as they do not act as principal to any trades. Will these be brought into scope in Singapore by virtue of acting as agent?
  • Should there be active lobbying for MAS to designate jurisdictions in which principals already have reporting requirements as relevant reporting jurisdictions to minimise this potential issue?
  • Would brokers or agents located in Singapore be more reluctant to act for non-financial specified persons (NFSPs) (or charge higher fees) given that they could incur additional regulatory obligations in doing so?

Comparison of differing regulatory requirements

  • Can a trade repository outside Singapore be used to satisfy Singapore reporting requirements?
  • To which foreign trade repositories will MAS grant a licence?
  • Will MAS grant licences in time given the accelerated proposed reporting timescales and the fact that reporting and registration/authorisation of trade repositories in the EU in particular is an area in which the timetable is slipping?

Issues for NFSPs to consider

Even at its most simplified level, NFSPs would have to report over 35 data fields. Some of these may reflect those in the US and the EU (e.g. timestamp, Legal Entity Identifiers etc). But others, such as mark-to market and collateral value involve a value judgement and may not be based on the same criteria.

  • A non-Singaporean party should be cautious before agreeing or representing that any data it provides to a Singaporean entity would actually meet the local requirements.

Further Information

The Consultation Paper is available here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Reed Smith | Attorney Advertising

Written by:

Reed Smith
Contact
more
less

Reed Smith on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.