Consultation Paper on Mandatory Trading of Derivatives Contracts

The Monetary Authority of Singapore (MAS) announced in its Consultation Paper on Mandatory Trading of Derivative Contracts that the Securities and Futures (Amendment) Act 2017 (which was passed on 9 January 2017) is targeted for commencement in 3Q 2018. We covered the changes that will be introduced by it in our update, “Slew of Amendments to the Securities and Futures Regime to Be Passed”.   
 
The Consultation Paper set out the proposed draft Securities and Futures (Trading of Derivatives Contracts) Regulations 2018 (Trading Regulations), which is hence targeted to also commence in 3Q 2018. It proposes the following (among others):

• Only banks that exceed a threshold of SGD20 billion gross notional outstanding of OTC derivatives contracts booked in Singapore for each of the last four quarters will be obliged to comply with the trading obligations.
• The trading obligations will only apply where both counterparties are banks that meet these requirements.
• In addition, the trading obligations will only apply where the banks are trading US Dollar, Euro or British Pound Interest Rate Swaps that meet the contract specifications set out in the Trading Regulations.

Consultation Paper on the Proposed E-payments User Protection Guidelines
 
The MAS has also issued a Consultation Paper on the Proposed E-payments User Protection Guidelines. The proposed E-payments User Protection Guidelines (Proposed Guidelines) will apply to a financial institution that issues a payment account that is:

• Held in the name of one or more persons, all of who are either individuals or micro-enterprises;
• Capable of having a balance of more than SGD500 at any one time, or is a credit facility; and
• Capable of being used for electronic payment transactions.  

In brief, the Proposed Guidelines propose the following:

• An account user should not be liable where he is not at fault for the loss.
• Where an account user has been reckless, financial institutions should provide liability caps (an amount of SGD100 is proposed) to clarify the amounts that the account user and the financial institution will be liable for.
• Financial institutions should have in place procedures to notify account users of transactions on their accounts.
• Account holders should monitor transaction notifications and report unauthorised transactions.
• Where an account holder has initiated a mistaken payment transaction, financial institutions should make reasonable efforts to recover the sum sent in error.  

Most financial institutions already have similar processes and procedures in place. The Proposed Guidelines should therefore not be particularly onerous.
 
LAC clarifies when its guidance is needed for listing applicants with foreign shareholding restrictions
 
The Listings Advisory Committee (LAC) has issued its latest quarterly report (dated 7 March 2018).
 
It deals with one matter that was referred to it. This involved the potential listing of a company incorporated in a country where the government had issued a policy guideline limiting foreign equity participation to 70%. The company's business was around the Asia-Pacific region and it derived less than 30% of its revenue from that country. The LAC required prominent disclosure of this risk in the prospectus.
 
The main takeaways from the report are as follows:

• The LAC recommended that future listing applications facing similar foreign shareholding restriction issues may not require referral to the LAC if the listing applicant’s revenue derived from the market in the relevant jurisdiction was less than 20%.
• Separately, the LAC recommended that any need for prospectus disclosure of the reasons for a listing applicant’s past delisting should be assessed by the Singapore Exchange on a case-by-case basis, with the view of making the disclosure for the benefit of investors.