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Excerpt of speech by Mr Ong
Chong Tee, Assistant Managing Director, Monetary Authority of Singapore (MAS)
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In the OTC derivatives market,
Singapore has seen impressive growth with an increase in market share of
global OTC derivatives activities.
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According to the recent BIS
survey, daily average turnover for OTC derivatives here rose almost three-fold
from 6 billion US Dollars in 2001 to 17 billion US Dollars in 2004.
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Singapore is now the 12th largest
OTC derivatives centre globally, further consolidating our position as the
second largest OTC derivatives centre in Asia.
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We are looking at further
developing the derivatives markets in 3 ways.
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Firstly on the regulatory front,
we have taken steps to ease the entry and compliance costs of firms engaging
in financial and commodity derivative activities.
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Currently, financial derivatives
fall under the purview of the Securities and Futures Act administered by MAS,
while most commodity derivatives are regulated under the Commodities Trading
Act administered by the International Enterprise Singapore, or IE Singapore.
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Through a MAS-IE S'pore
initiative, the two regulators have agreed to provide a single regulatory
interface for corporations applying for authorisation as markets, clearing
houses, or licensing as futures brokers. So interested corporations can now
approach MAS directly for the necessary authorisation if their financial
products come under the regulatory purview of both Acts.
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For the broader derivatives market
in Singapore, we have also introduced measures to enhance its development. For
example, under the previous legislative framework, a market operator is
required to either apply for an approved exchange status, with the attendant
full set of legal compliance requirements, or be exempted totally from our
regulatory ambit.
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In recognition of the rigidity of
this all-or-nothing model, we have introduced the Recognised Trading Systems
(or ReTS) provider regime in the Securities and Futures Act, to give us the
flexibility to apply regulatory requirements consistent with the risk profile
of an individual Recognised Trading System provider.
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We will continue to refine our
regulatory framework to reduce regulatory burden so as to encourage new and
innovative trading platforms to take root in Singapore.
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Secondly, we are improving our
trading infrastructure.
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Rapid technological advancement is
changing how derivatives products are traded and will redefine the landscape
of the derivatives marketplace. Technology has not only opened the doors to
new players through greater accessibility, but also blurred the line between
geographic borders and between asset classes.
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Exchanges now have to be able to
offer trading in multiple asset types and to cater to the growing
sophistication of market participants, to compete more effectively.
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I am happy to note that the
Singapore Exchange has introduced its new derivatives trading engine, SGX
QUEST (which stands for SGX Quotation and Executive System for Trading) in
August this year, to eventually lead to an integrated trading engine for its
securities and derivatives activities.
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Thirdly, we seek to broaden the
instruments traded in Singapore.
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We envisage strong growth in
credit derivatives, driven by the redistribution of risks from banks and
insurance companies via the capital markets.
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We are also promoting the
commodity derivatives market. Already well-positioned as an oil hub, Singapore
is a natural choice for financial institutions to set up regional energy
derivatives trading desks and more broadly, to consolidate commodity
derivatives operations here.
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The SGX is currently in
discussions with NYMEX, for the latter to consider setting up a futures
exchange here. Such a joint venture will be an important first step towards
developing strong exchange-related trading and clearing facilities to service
the regional markets.
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Full
Text of Speech
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Source: Monetary
Authority of Singapore News Release 19 Oct 2004
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Singapore derivatives market being developed further
