March 23, 2018

Capital Markets Policy DivisionMarkets Policy & Infrastructure Department
Monetary Authority of Singapore
10 Shenton Way, MAS Building
Singapore 079117

Comments on the Consultation Paper:
Draft Regulations for Mandatory Trading of Derivatives Contracts
issued by the Monetary Authority of Singapore
We, the Japanese Bankers Association (“JBA”), would like to express our gratitude forthis opportunity to comment on the consultation paper: Draft Regulations for Mandatory
Trading of Derivatives Contracts, issued on February 21, 2018 by the Monetary Authority ofSingapore (“MAS”).
We welcome the proposal in that mandatory use of trading facilities for certaintransactions and other matters described in the consultation paper are in line with the G20
objectives and FSB recommendations on OTC derivatives reforms, and take into accountconsistency with, among other things, the proposed clearing obligations published by MAS in2015 and existing regulations of US and EU.
Nevertheless, MAS is requested to take the actions commented below in order to reduceburdens of globally-active financial institutions given that similar regulations are already ineffect in other jurisdictions.
It is also requested that MAS finalise this regulation as early as possible in order tofacilitate the compliance of the trading obligations by financial institutions and take flexible
approaches in terms of the timing of its implementation by, for example, applying a certain
grace period in consideration of the progress of financial institutions’ preparation.
1. Question 2:
MAS seeks views on the proposal to impose trading obligations on banks thatexceed a threshold of S$20 billion gross notional outstanding of OTC derivatives
contracts booked in Singapore for each of the last four quarters.

1(Our comment)
With a view to ensuring regulatory transparency and reducing practical burdens, it isrequested that MAS or other competent authorities will periodically publish the list offinancial institutions exceeding the trading threshold and thereby clarify the specified persons
subject to trading obligations.
Please also clarify the definition of “OTC derivatives contracts” which is an underlying
component of the threshold and commonly applied to the proposed clearing obligations, aswell as the rationale for that definition.
(Rationale)
Generally, even if the counterparty is a financial institution based in Singapore, it isdifficult to identify, in practice, the location at which an OTC derivatives contract of thefinancial institution is ultimately booked. Also, whether the financial institution exceeds thethreshold could be identified only by self-assessment and not by third parties. Further,
confusion may arise if the counterparty’s notional principal amount of OTC derivatives
changes and thus the financial institution may no longer be subject to trading obligations with
notional amounts below the threshold.
In this view, as requested in our comment on the proposed clearing obligations submitted
in July 20151 to disclose the specified persons subject to the mandatory clearing, MAS orother competent authorities should publish the list of financial institutions subject to trading
obligations, as being adapted by other jurisdiction, including Australia2 and Hong Kong3 in
implementation of their respective clearing obligations. This approach should further enhance
the regulatory transparency and significantly decrease practical burdens required to assesscounterparties, etc., and thereby enable easier achievement of the objectives for implementing
the regulation.
In the consultation paper, MAS proposes the trading threshold and explains as follows:“In effect, this will be the same group of banks that will be subject to MAS’ clearingobligations”. However, we think that the consultation paper does not necessarily provide anexplicit guidance on the definition of “OTC derivatives contracts” which are to be included in
the calculation of gross notional outstanding as well as the rationale for the proposed threshold.
1

https://www.zenginkyo.or.jp/fileadmin/res/abstract/opinion/opinion270741.pdf
http://asic.gov.au/regulatory-resources/markets/otc-derivatives-reform/central-clearing-of-otc-derivatives/clearing-entity-notifications/3
http://www.sfc.hk/web/EN/files/SOM/OTC/List%20of%20Institutions%20that%20have%20Reached%20the%
20Clearing%20Threshold%20SFC%20to%20HKMA%20Final%20(EN)%20-%204.pdf
22Given this, MAS is requested to clarify them in finalising the regulation.
2. Question 7:
MAS seeks feedback on the trading facilities which market participants may access,or intend to access, for the trading of USD, EUR and GBP IRS.

(Our comment)
It is requested that MAS determine that trading facilities of third countries (e.g. US andEU) are equivalent to the corresponding trading facilities under its proposed trading
obligations.
(Rationale)
Other jurisdictions (e.g. US and EU) already have in place regulations to operationalise
the obligation to use trading facilities, and therefore, globally-active financial institutions havealready completed system developments, administrative frameworks and other actions to adapt
to SEF (Swap Execution Facility) under the US regulation and MTF (Multilateral TradingFacility) under the EU regulation.
From the perspective of reducing burdens of such financial institutions as much aspractical, similarly to US/EU regulators, MAS should assess third-country trading facilities as
equivalent for the purposes of the proposed trading obligations so that the financial institutions
can apply the existing practices, including contracts (e.g. Rule Book), just as they are. Thisshould lead to cross-border regulatory harmonisation and enable more efficient achievement ofpolicy objectives.
3. Question 10:
MAS seeks views on the proposal to subject IRS denominated in EUR and GBP,
with the contract specifications set out in Table 2, to clearing obligations.

(Our comment)
We do not have any concerns about the proposal to subject EUR and GBP IRS to clearingobligations. We, however, request that the maximum maturity applied to clearing of SGD IRS
will not exceed the maximum maturity available when clearing them through globally-used
clearing agencies (e.g. about 10 years in the case of LCH).
(Rationale)
We are in support of the proposal which aims to align US and EU clearing obligations.
However, MAS is requested to appropriately set the maturity for SGD clearing up to about 103

years that are available at the globally-used clearing agencies, such as LCH4. We also request
MAS to take into account the liquidity and the consistency with maturity of other currencies
regulated in the consultation paper when setting the maturities.

4

https://www.lch.com/services/swapclear/what-we-clear

4