Nature of organised markets

MAS provides useful examples of Approved Exchanges and Recognised Market Operators in their Guidelines on the Regulations of Markets.

Approved Exchange:

According to MAS (Guidelines)

Description of the arrangement:
A corporation seeks to operate a securities market in Singapore. The person provides proprietary trading terminals for licensed intermediaries to enter orders and effect transactions on the securities market. A large number of classes of securities are traded on the market (for example, equities, structured warrants and exchange traded funds) and the products traded are popular and are widely and heavily traded by both retail and institutional investors. The securities market is the only such facility in Singapore that the corporation operates and the failure of the securities market will affect not just the participants and investors, but also the broader financial sector.

Due to the broad nature of the activities of the market operator, large number of classes of securities traded on the market and the parties who may be affected in the event that the market runs into difficulties, amongst other factors, the market would be considered as having systemic importance. As such, to meet MAS’ regulatory objectives, the corporation operating the securities market would be regulated as an approved exchange. 

Recognised Market Operator 

Description of the arrangement:
A corporation provides an electronic facility to trade fixed income products via a website to institutional investors only. The electronic facility allows the institutional investors to post indicative prices, volumes and futures contracts that they wish to transact in. The facility also enables institutional investors to obtain the identities of interested counterparties either via its website or through other communication means. The volume of trades conducted through the electronic is moderately high and the electronic facility offers limited classes of securities for trading, including US government securities and corporate bonds.

The information posted on the electronic facility and the ability to ascertain the identity of interested counterparties lead to a reasonable expectation that indicative offers or invitations will result in the conclusion of a transaction. Thus, the market would fall within the regulatory ambit of Part II of the SFA. As the electronic facility is only used by institutional investors and the volume of trade is moderately high, the failure of the facility is not likely to have a widespread impact on the broader financial sector since institutional investors are better equipped to manage their risks. Thus, the corporation operating the electronic facility would be regulated as a RMO under Part II of the SFA based on the limited systemic risks it poses.