Statute Details
- Title: Securities and Futures (Clearing Facilities of Approved Exchanges or Recognised Market Operators) (Exemption) Regulations 2023
- Act Code: SFA2001-S615-2023
- Type: Subsidiary Legislation (SL)
- Commencement Date: 7 September 2023
- Enacting Authority: Monetary Authority of Singapore (made under powers in the Securities and Futures Act 2001)
- Authorising Provisions: Section 81Q read with section 49(6) of the Securities and Futures Act 2001
- Regulation Numbers (Extract): Regulation 1 (Citation and commencement); Regulation 2 (Exemption); Regulation 3 (Obligation to notify Authority)
- Legislative Instrument Number: S 615/2023
- Status (as provided): Current version as at 27 March 2026
What Is This Legislation About?
The Securities and Futures (Clearing Facilities of Approved Exchanges or Recognised Market Operators) (Exemption) Regulations 2023 (“Exemption Regulations”) create a targeted regulatory carve-out for certain clearing facilities operated by an approved exchange or a recognised market operator. In plain language, the Regulations allow these market infrastructures to establish or operate their own clearing facilities without being subject to a specific statutory requirement in section 49(1) of the Securities and Futures Act 2001 (“SFA”), provided strict conditions are met.
At the core of the Regulations is a policy distinction: where a clearing facility is used only for transactions executed on the operator’s own organised market and is not “routed” to other clearing entities, the law treats the arrangement as sufficiently contained. This reduces regulatory duplication while still preserving safeguards through verification and calculation requirements. The exemption is therefore conditional, not automatic.
The Exemption Regulations also impose a compliance mechanism: even if an exchange or market operator qualifies for the exemption, it must notify the Monetary Authority of Singapore (“MAS”) within specified timelines. Failure to notify is treated as an offence, with monetary penalties that increase for continuing non-compliance.
What Are the Key Provisions?
1. Regulation 1: Citation and commencement
Regulation 1 is straightforward. It provides that the Regulations may be cited as the “Securities and Futures (Clearing Facilities of Approved Exchanges or Recognised Market Operators) (Exemption) Regulations 2023” and that they come into operation on 7 September 2023. For practitioners, this matters because the notification deadlines in Regulation 3 are anchored to this commencement date.
2. Regulation 2: The exemption from section 49(1) of the SFA
Regulation 2 is the substantive heart of the instrument. Under Regulation 2(1), an approved exchange or recognised market operator that establishes or operates a clearing facility is exempt from section 49(1) of the SFA, subject to the conditions in Regulation 2(2).
Condition A: Transaction execution must be on the operator’s own organised market
Regulation 2(2)(a) requires that every transaction to be cleared or settled using the clearing facility must be:
- Executed on an organised market established or operated by the same approved exchange or recognised market operator; and
- Not routed by that operator to any of the following for clearance or settlement:
- an approved clearing house;
- a recognised clearing house;
- a person (other than the operator itself) who operates a clearing facility.
This is a strict “all transactions” requirement. Practically, it means the exemption is designed for a closed-loop model: the operator’s market executes the trades, and the operator’s own clearing facility clears/settles them without outsourcing or routing to other clearing entities.
Condition B: Clearing must be limited to verification and calculation (including multilateral netting)
Regulation 2(2)(b) further limits how the clearing facility may process transactions. It provides that every transaction cleared or settled using the clearing facility must be only cleared or settled in either or both of these ways:
- Verification of transaction terms: information relating to the terms of the transaction is verified by the clearing facility to confirm the transaction; and/or
- Calculation of parties’ obligations: the obligations of parties under the transaction are calculated, whether or not such calculations include multilateral netting arrangements.
For legal and compliance teams, this language is important because it delineates the permitted “function” of the clearing facility for exemption purposes. The clearing facility may perform verification and obligation calculation, but the exemption is not framed as a general permission to perform broader clearing activities beyond those described. Where a facility’s processes extend beyond these functions, the exemption risk increases.
3. Regulation 2(3): Cessation of the exemption
Regulation 2(3) provides that the exemption ceases if any transaction cleared or settled using the clearing facility falls outside the conditions. Specifically, the exemption ends if any transaction:
- is not executed on the operator’s own organised market; or
- is routed by the operator to an approved clearing house, recognised clearing house, or another clearing-facility operator; or
- is not cleared or settled in the manner specified in Regulation 2(2)(b) (i.e., verification and/or calculation as described).
This “any transaction” trigger is a compliance red flag. Even a single out-of-scope transaction could cause the exemption to cease. In practice, counsel should advise clients to implement robust governance, monitoring, and audit trails to ensure that routing and processing logic cannot inadvertently breach the conditions.
4. Regulation 3: Obligation to notify MAS
Regulation 3 requires notification by the approved exchange or recognised market operator that relies on the exemption.
Notification for establishment of the clearing facility (Regulation 3(1))
If the exempt person had established the clearing facility before 7 September 2023, it must notify MAS in writing by 7 October 2023 of:
- the fact that it had established the clearing facility; and
- its reliance on the exemption under Regulation 2(1).
If the exempt person establishes the clearing facility on or after 7 September 2023, it must notify MAS within 14 days after the clearing facility is established.
Notification for operation of the clearing facility (Regulation 3(2))
Regulation 3(2) mirrors the establishment notification, but for operation:
- If operation commenced before 7 September 2023, notification is due by 7 October 2023.
- If operation commences on or after 7 September 2023, notification is due within 14 days after commencement.
Offence and penalties for failure to notify (Regulation 3(3))
Regulation 3(3) states that an approved exchange or recognised market operator that fails to comply with Regulation 3(1) or (2) is guilty of an offence. The penalty is:
- a fine not exceeding $150,000; and
- for a continuing offence, an additional fine not exceeding $15,000 for every day (or part of a day) during which the offence continues after conviction.
From a practitioner’s perspective, this is a strict enforcement posture. Even if the entity is substantively eligible for the exemption, procedural non-compliance (late or absent notification) can trigger criminal liability and escalating financial exposure.
How Is This Legislation Structured?
The Exemption Regulations are compact and structured around three provisions:
- Regulation 1 sets out the citation and commencement date.
- Regulation 2 provides the exemption from section 49(1) of the SFA, including detailed conditions and a cessation mechanism if transactions fall outside the permitted scope.
- Regulation 3 imposes notification duties on the exempt person, with specified deadlines for facilities established/operated before and after commencement, and sets out offence and penalty consequences for failure to notify.
Notably, the instrument does not include extensive definitions or administrative procedures in the extract provided; instead, it relies on the broader SFA framework and the established regulatory concepts of “approved exchange,” “recognised market operator,” “clearing facility,” and “organised market.”
Who Does This Legislation Apply To?
The Regulations apply to an approved exchange or a recognised market operator that establishes or operates a clearing facility. The exemption is not available to all market participants; it is limited to these specific categories of market infrastructure providers.
In addition, the exemption is conditional upon the clearing facility being used in a particular way: transactions must be executed on the operator’s own organised market and must not be routed to other clearing houses or other clearing-facility operators, and the clearing facility must perform only the permitted verification and/or obligation calculation functions. If those conditions are not met for any transaction, the exemption ceases.
Why Is This Legislation Important?
For practitioners advising exchanges, market operators, and their clearing technology teams, these Regulations provide a legally workable pathway to operate an in-house clearing facility while avoiding the full application of section 49(1) of the SFA—but only within a tightly defined operational model.
The most significant practical impacts are:
- Operational design constraints: the exemption depends on routing logic and processing scope. Counsel should work with trading/clearing systems teams to ensure that trades cannot be routed to other clearing entities and that clearing functions remain within the verification and calculation framework.
- All-transactions compliance: because Regulation 2(3) is triggered by any out-of-scope transaction, compliance monitoring must be continuous, not periodic.
- Procedural risk: notification is mandatory and failure to notify is an offence with potentially substantial fines, including daily penalties for continuing non-compliance.
From an enforcement and governance standpoint, the Regulations effectively require a documented compliance posture: evidence of reliance on the exemption, records of transaction routing, and audit-ready confirmation that clearing activities align with the permitted verification and calculation functions. Where an entity is considering changes to market structure, connectivity, or clearing workflows, legal review should assess whether the changes could cause the exemption to cease.
Related Legislation
- Securities and Futures Act 2001 (including section 49(1) and section 81Q, and section 49(6) as referenced in the enacting formula)
- Futures Act 2001 (listed in the provided metadata as related legislation)
Source Documents
This article provides an overview of the Securities and Futures (Clearing Facilities of Approved Exchanges or Recognised Market Operators) (Exemption) Regulations 2023 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.