SINGAPORE - The Monetary Authority of Singapore (MAS) will extend regulatory requirements for unlisted margined derivatives (UMD) to afford better protection to retail investors.
The scope has widened to address the specific risks of UMDs, such as contracts for differences (CFDs) and leveraged foreign exchange products (LFX).
As the products are unlisted, they are not traded through an exchange which guarantees settlement obligations to investors. This means retail investors also face an added counterparty risk, and may not be able to recover money in their trading accounts.
Mr Lee Chuan Teck, Assistant Managing Director for Capital Markets, said: "The proposed enhancements will increase the level of protection for investors and facilitate faster recovery of their funds should the intermediary default."
MAS proposes to enhance credit risk management by derivative dealers and to ensure that they are adequately capitalised. For example, there will be an increase in minimum margin requirement of notional transaction value from two per cent to five per cent for CFDs on FX and other LFX contracts.
MAS also proposes to enhance the protection and recovery of retail investors' assets in the event of insolvency of the dealer. This includes having a base capital requirement of $5 million for CMS licensees and prohibiting dealers from maintaining customers' assets in trust accounts with custodians outside Singapore.
MAS will also enhance risk disclosure to help retail investors make informed decisions on the suitability of such products. This includes having a fact sheet with a list of specified information and risks in plain language in a "Question & Answer" format.
MAS invites the public to submit written comments via email or post by July 2. More details are available at www.mas.gov.sg/