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Exempt persons dealing in non-centrally cleared derivatives contracts on behalf of accredited investors, expert investors or institutional investors

Securities and Futures (Licensing and Conduct of Business) Regulations

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—(1) A person exempted from holding a capital markets services licence under section 99(1)(a), (b) or (c) of the Act who deals in non-centrally cleared derivatives contracts with accredited investors, expert investors or institutional investors must implement policies and procedures to ensure the following:(a)that written trading relationship documentation is signed with each counterparty before, or at the time when, the person enters into a non-centrally cleared derivatives contract, except where —(i)that derivatives contract is the only transaction between the exempt person and that counterparty; and(ii)the person provides a written trade confirmation of the material rights and obligations of the exempt person and that counterparty under that derivatives contract;(b)that a written trade confirmation of the material terms of each non-centrally cleared derivatives contract is provided to each counterparty, as soon as practicable after the execution of each non-centrally cleared derivatives contract;(c)that the person’s records of the material terms and valuations of each non-centrally cleared derivatives contract in its portfolio are reconciled, at regular intervals, with each counterparty’s records of such material terms and valuations;(d)that the necessity of portfolio compression in relation to the person’s portfolio of non-centrally cleared derivatives contracts is assessed at regular intervals; and(e)that, in the case of any dispute arising from any discrepancy between the person’s records of the material terms or valuations of any non-centrally cleared derivatives contract in its portfolio with a counterparty’s records of such material terms and valuations, agreement is sought with that counterparty on a dispute resolution mechanism to resolve that dispute.(2) In this regulation —“non-centrally cleared derivatives contract” means an OTC derivatives contract that —(a)is not, and is not intended to be, cleared or settled by a person operating a clearing facility through which parties to the contract substitute, through novation or otherwise, the credit of the person operating the clearing facility for the credit of the parties; and(b)is booked in Singapore;“portfolio compression” means a process —(a)that is applied to a portfolio of derivatives contracts;(b)under which some or all of the derivatives contracts in the portfolio are —(i)modified to reduce their notional amount; or(ii)terminated and replaced with one or more new derivatives contracts which have the effect of reducing notional exposures between the participants; and(c)that is conducted for the purposes of reducing counterparty risk or operational risk for the participants.

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