As a statutory regulator, MAS will remain primarily responsible for the supervision of intermediaries who are our licensees in areas of capital and reserves, business conduct, antimoney laundering & counter terrorist financing (AML/CFT) and operational resilience. These are areas which have been stipulated in our regulations and notices, and are statutory obligations to be complied with. Starting from this year, MAS will no longer require exchanges to inspect their members in these areas as long as the entities are licensed by MAS. In other words, MAS will effectively be the “lead regulator” in these areas. 27. The need to form a separate SRO at this juncture for the purpose of member supervision is in our view, not compelling. It is unlikely to be an efficient model given the size of our market. In fact, it may require greater coordination since there will be more parties involved, namely MAS, the exchanges and yet another SRO. 28. The exchanges will remain responsible for areas affecting their respective market operations such as those relating to the priority of orders on a trading floor or risk management rules on margin requirements. In other words, these are business rules which members have to comply with, and may differ from exchange to exchange. Exchanges will need to supervise their members for compliance, in accordance with the risks these members pose to the markets or clearing houses, and undertake disciplinary proceedings for members who breach their rules. 29.
This is partly because the listings function is the more visible part of the SRO to investors and listed companies. But in fact, the SRO function is much broader. Besides functioning as a listing authority, the SGX’s SRO role also encompasses a market surveillance function to uphold the integrity of the market, and a member supervision function to ensure participants’ adherence to trading and clearing rules. 14. So removing the SRO function from the SGX – as some have suggested – could mean that the exchange will not need to undertake market surveillance; nor to regulate members for compliance with rules of the exchange. Others have suggested removing only the listing authority function from SGX. But the flip side is that this risks losing the synergy of its regulatory function with its other roles pertaining to the development of a viable and credible marketplace; and creates ambiguity as to who oversees proper conduct of listed companies – the separate listing authority or the exchange. 2  BIS central bankers’ speeches  15. It is worth noting that SGX’s SRO function is neither a new invention nor “uniquely Singapore”. Exchange self-regulation has a long history in financial markets and in many established markets. Most, if not all exchanges globally, perform a varying range of SRO functions.