Singapore moves to migrate OTC derivatives trading on exchange

MAS is seeking industry feedback on proposed rule changes to OTC derivatives already implemented in the US and the EU.

Financial authorities in Singapore have proposed changes to OTC derivatives trading, which could see a migration of activity onto electronic venues. 

The Monetary Authority of Singapore (MAS) is seeking industry feedback on the proposal that aims to improve market transparency and bring it in line with rules in the US and Europe.

The rules will see the most globally traded OTC derivatives, including interest rate swaps denominated in US Dollar, Euro and Pound Sterling, be traded on exchanges or other centralised trading facilities.

It will apply to banks with gross notional outstanding OTC derivatives of more than $20 billion, with about 80% of the market in Singapore set to be impacted by the change.

The proposal stems from the G20 and Financial Stability Board agreement in 2009 which aimed to curb market abuse on OTC markets through trade reporting, risk mitigation and margining of non-centrally cleared OTC derivatives.

In January last year, the MAS was handed extra powers to mandate the trading of OTC derivatives on organised markets and extend the regime to market operators.

MAS added it plans to seek equivalence determinations from the US and the EU for exchanges and other centralised trading facilities in Singapore, meaning the OTC derivatives market in Singapore will be accessible to both regions under the regime.