The SFA and the Securities and Futures (Trading of Derivatives Contracts) Regulations 2019 (SF(TDC)R) require certain entities to execute certain derivatives contracts on an organised market (trading mandate). One criterion for the application of the trading mandate is that “each party to the derivatives contract executes the derivatives contract through that party’s office located in Singapore (whether a head office or branch office)”. What is the difference between this criterion in the SF(TDC)R and the concept of derivatives contracts which are “traded in Singapore” in the SF(RDC)R?
As stated in SF(TDC)R, the criterion for the application of the trading mandate is based on the location of the office that an individual trader is representing when executing a derivatives contract, rather than the individual trader himself. In contrast, the determination of whether a derivatives contract is “traded in Singapore” for the purposes of the SF(RDC)R, depends on – (i) whether the individual trader’s place of employment is located in Singapore, or (ii) whether the trader is physically in Singapore at the time of the execution of the contract and conducts or is authorised to conduct, on behalf of a specified person, activities relating to the execution of derivatives contracts in Singapore for 30 days or longer prior to the execution of the contract.
The following examples illustrate the differences between the SF(TDC)R criterion and the SF(RDC)R:
(a) Example 1 – Trader A, who is employed by Bank A (Singapore branch) and is located in Singapore, executes a contract in Singapore through a trading account associated with Bank A (Singapore branch). This contract meets the SF(TDC)R criterion and is also a derivatives contract which is traded in Singapore for the purposes of the SF(RDC)R.
(b) Example 2 – When trading after Singapore hours, Bank B (Singapore branch) relies on Trader B who is employed by its London office and is based in London. Trader B executes a contract in London through a trading account associated with Bank B (Singapore branch). This contract meets the SF(TDC)R criterion because the trading account used is associated with Bank B (Singapore Branch). However, the contract is not traded in Singapore for the purposes of the SF(RDC)R because Trader B is neither employed in Singapore nor physically in Singapore.
Reference:
• Regulation 2 of the SF(RDC)R