MAS Aligns Globally on OTC Derivatives Regulation

Following a consultation process, the Monetary Authority of Singapore (MAS) has adopted what it terms a “close to final” set of reporting rules on derivatives, that will align it with other global regulators. The rules will be adopted in October 2024 in line with other jurisdictions.

Under the rules, MAS says UTI (unique trade identifiers) should be generated and reported for each OTC derivative contract, and where those contracts are part of a package, a UTI should be generated for each trade therein. Responding to a “common underlying concern” among respondents, it adds will adopt a stance that is consistent with other jurisdictions and that will reduce fragmentation.

On FX swaps, following feedback, MAS says it will require the reporting of FX swaps as two separate contracts. The reported two contracts will be required to be linked by the data field ‘FX swap link ID’. “For clarity, the ‘FX swap link ID’ data field should only be reported for FX swaps, MAS states. “For other types of package trades, reporting entities should report the identifier linking the package trades under the ‘Package identifier’ data field.”

On the timing of the implementation of the new rules, MAS says it has been closely monitoring the developments in major jurisdictions such as the US and EU, and the implementation timelines to their respective OTC derivatives reporting regimes. It has also been in close consultation with several Asia-Pacific regulators on their respective implementation timelines. Having taken into consideration the feedback and the updated commencement dates in major jurisdictions, MAS will commence the new rules in October 2024, being approximately six months after the commencement of the EU’s EMIR Refit and aligning with commencement date of ASIC’s revised rules.

MAS says it received “mixed responses” to its proposals for existing contracts to be re-reported. It adds that it “recognises” the operational challenges the industry would face in re-reporting, but says it believes this is necessary to achieve “meaningful improvements” and harmonisation of OTC derivatives data quality. “As outstanding OTC derivatives contracts reported under the current requirements will continue to form a significant portion of the total derivatives data, applying the new requirements to only new contracts will not yield material improvements to data quality until a much later date when majority of these outstanding contracts have either expired or been terminated,” it states.

Given the strong support and the benefits of international harmonisation of reporting messages, MAS adds it will proceed with the adoption of the ISO 20022 XML message format for OTC derivatives reporting.