Statute Details
- Title: Securities and Futures (Clearing of Derivatives Contracts) Regulations 2018
- Act Code: SFA2001-S264-2018
- Type: Subsidiary Legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289)
- Enacting Authority: Monetary Authority of Singapore (MAS)
- Commencement: 1 October 2018
- Current status (as provided): Current version as at 27 Mar 2026
- Key amendments (from timeline): Amended by S 680/2019 (11 Oct 2019); Amended by S 466/2021 (effective 1 Jul 2021)
- Key provisions: Regulation 2 (definitions); Regulation 3 (specified derivatives contracts); Regulation 4 (prescribed time); Regulation 5 (exemptions from section 129C of the Act); Regulation 6 (keeping of books and information)
What Is This Legislation About?
The Securities and Futures (Clearing of Derivatives Contracts) Regulations 2018 (“Clearing Regulations”) are subsidiary legislation made under the Securities and Futures Act (the “SFA”). In plain terms, the Regulations support Singapore’s regulatory framework for derivatives markets by identifying which derivatives contracts are subject to “clearing” requirements under the SFA, setting timing rules for when certain obligations are triggered, and creating targeted exemptions for specified financial institutions.
Derivatives clearing is a risk-management mechanism. Instead of bilateral trading (where two counterparties manage each other’s credit risk), cleared derivatives are typically processed through a clearing house, which becomes the central counterparty. This can reduce counterparty default risk and improve transparency and operational resilience. The Clearing Regulations therefore play a practical role in determining which contracts fall within the clearing regime and which institutions may be exempt from certain clearing-related obligations.
Although the extract provided focuses on definitions, prescribed time, exemptions, and record-keeping, the Regulations are best understood as part of a broader statutory scheme in the SFA. In particular, the Regulations refer to section 129B (definition of “specified derivatives contract”) and section 129C (an obligation that is relevant to clearing). The Regulations also impose compliance infrastructure through record-keeping duties and associated offences.
What Are the Key Provisions?
1. Definitions that drive the clearing and exemption framework (Regulation 2)
The Regulations contain definitions that determine how eligibility for exemptions is measured and how certain concepts are interpreted. Two definitions are especially important for practitioners:
- “aggregate outstanding notional amount” (for a bank): This is calculated as the aggregate notional amounts of every derivatives contract that (i) is not exchange-traded, (ii) the bank is a party to, (iii) is booked in Singapore, and (iv) is outstanding. The definition is therefore a scoping tool: it narrows the universe of contracts to those that are relevant to the exemption threshold.
- “booked in Singapore”: A derivatives contract is “booked in Singapore” if it is entered on the balance sheet or profit and loss accounts of a person where (i) the person is a party, (ii) the person’s place of business is in Singapore, and (iii) the relevant accounts relate to the person’s business in Singapore. This is a jurisdictional and accounting-based test, not merely a trading-location test.
Other definitions—such as “business day”, “outstanding”, and “place of business”—ensure consistent interpretation of timing and status. “Outstanding” is limited to contracts that have not expired and have not been terminated in accordance with the contract terms or by agreement.
2. Prescribed derivatives contracts (Regulation 3 and the Schedule)
Regulation 3 provides that the derivatives contracts set out in the Schedule are “prescribed” for the purposes of the definition of “specified derivatives contract” in section 129B of the SFA. In practice, this means that the Schedule is the gateway: only those contracts listed there are treated as “specified” and therefore fall within the clearing-related regulatory regime.
For legal and compliance teams, the immediate task is to map the firm’s product catalogue to the Schedule. If a contract is not within the Schedule, the clearing-related obligations that depend on the “specified derivatives contract” definition may not apply. Conversely, if it is within the Schedule, the firm must assess whether any exemptions apply and whether the firm must comply with the relevant obligations under the SFA.
3. Prescribed time for section 129C(1) (Regulation 4)
Regulation 4 sets a timing rule for the purposes of section 129C(1) of the SFA. The “prescribed time” is “one business day after the day on which the specified derivatives contract is entered into.”
This is a critical operational detail. It effectively creates a short compliance window: once a specified derivatives contract is entered into, the relevant obligation under section 129C(1) is measured from the next business day. For practitioners, this affects trade capture, confirmation workflows, and clearing submission processes. It also has implications for breach analysis: if a firm enters into a contract on a Friday, the “one business day after” calculation will typically point to Monday (assuming no public holiday).
4. Exemptions from section 129C (Regulation 5)
Regulation 5 exempts certain “specified persons” from section 129C of the SFA. The exemptions are not blanket; they are structured around (i) size thresholds, (ii) duration of business, and (iii) licensing categories.
- Bank with limited aggregate outstanding notional amount: A bank licensed under section 7 or 79 of the Banking Act is exempt if its aggregate outstanding notional amount does not exceed $20,000,000,000. The threshold is tested using (i) the last day of the most recently completed quarter and (ii) the last day of each of the three consecutive quarters immediately preceding that quarter. This “multiple-quarter” test is designed to prevent firms from relying on temporary reductions.
- Newly established banks: A bank licensed under the Banking Act that has been carrying on business for less than one year is exempt. This recognises that compliance readiness and operational build-out may take time.
- Merchant banks: A merchant bank licensed (or treated as having been granted a merchant bank licence) under the Banking Act is exempt.
- Finance companies: Licensed finance companies under the Finance Companies Act are exempt.
- Insurers: Licensed insurers under the Insurance Act are exempt.
- Capital markets services licence holders: Any holder of a capital markets services licence is exempt.
From a practitioner’s perspective, the exemption analysis is highly fact- and status-dependent. It requires: (a) confirming the firm’s licensing category; (b) if the firm is a bank, computing the aggregate outstanding notional amount using the Regulation 2 definitions; and (c) if relying on the size threshold, ensuring the quarterly test is satisfied.
5. Keeping of books and other information (Regulation 6)
Regulation 6 imposes record-keeping obligations on specified persons who are not exempt under Regulation 5. This is an enforcement and auditability provision: it ensures MAS can verify compliance with the SFA and the Clearing Regulations.
Retention periods:
- Relevant books must be kept until at least 5 years after the last date of expiry or termination of the contract, agreement, or transaction to which the books relate.
- Transaction information and other information must be kept until at least 5 years after the date of expiry or termination of the relevant contract, agreement, or transaction.
Offence and penalties: A contravention of the record-keeping duty is an offence. On conviction, the fine may not exceed $50,000. For a continuing offence, an additional fine may be imposed of up to $5,000 for every day or part of a day during which the offence continues after conviction.
Exclusion of section 333(1) of the SFA: Regulation 6(3) states that section 333(1) of the SFA does not apply to offences mentioned in paragraph (2). While the extract does not reproduce section 333(1), the practical effect is that the general provision governing certain aspects of offences (often procedural or penalty-related) is expressly carved out for these record-keeping offences.
How Is This Legislation Structured?
The Clearing Regulations are structured as a short set of operative provisions supported by a Schedule.
- Regulation 1 sets the citation and commencement date (1 October 2018).
- Regulation 2 provides definitions used throughout the Regulations, including key concepts for exemption calculations.
- Regulation 3 prescribes the derivatives contracts in the Schedule for the purpose of the SFA’s definition of “specified derivatives contract”.
- Regulation 4 prescribes the timing rule for section 129C(1) obligations (one business day after entry).
- Regulation 5 provides exemptions from section 129C for specified persons, including banks subject to notional thresholds and various licensed entities.
- Regulation 6 imposes record-keeping duties and sets penalties for non-compliance.
- The Schedule lists the specified derivatives contracts. This is the substantive product list that determines whether a contract is within the clearing regime.
Who Does This Legislation Apply To?
The Regulations apply to “specified persons” as that term is used in the SFA and in the Clearing Regulations’ exemption and record-keeping provisions. In practical terms, the Regulations are aimed at financial institutions that trade or hold derivatives contracts in Singapore and that may be subject to section 129C of the SFA.
Regulation 5 identifies categories that are exempt from section 129C, including certain banks (subject to licensing and, for the notional threshold exemption, quantitative criteria), merchant banks, finance companies, insurers, and holders of capital markets services licences. Regulation 6 then applies to specified persons who are not exempt—requiring them to maintain relevant books and transaction information for the prescribed retention periods.
Why Is This Legislation Important?
For practitioners, the Clearing Regulations matter because they translate the SFA’s clearing policy into operational rules. The “specified derivatives contract” concept is product-specific and depends on the Schedule. The prescribed timing rule in Regulation 4 affects how quickly trades must be cleared after execution. These are not merely legal abstractions; they drive workflow design, systems integration, and compliance monitoring.
The exemptions in Regulation 5 are equally important. Many firms will not be able to assume exemption automatically. Banks, in particular, must compute aggregate outstanding notional amounts using definitions tied to booking in Singapore and contract status. The multi-quarter threshold test means that compliance teams must implement ongoing measurement and governance to avoid inadvertent loss of exemption status.
Finally, Regulation 6 underscores MAS’s enforcement approach through record-keeping. Even where a firm is exempt from the clearing obligation under section 129C, it may still have other regulatory duties under the SFA. For non-exempt firms, the five-year retention requirement and the daily continuing-offence penalty create strong incentives to maintain robust documentation, audit trails, and defensible data retention practices.
Related Legislation
- Securities and Futures Act (Cap. 289) (including sections 129B, 129C, 129G, 341, and section 333(1))
- Banking Act (Cap. 19)
- Finance Companies Act (Cap. 108)
- Insurance Act (Cap. 142)
- Futures Act (as referenced in the provided metadata)
Source Documents
This article provides an overview of the Securities and Futures (Clearing of Derivatives Contracts) Regulations 2018 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.