Statute Details
- Title: Securities and Futures (Margin Requirements for Exempt Financial Institutions) Regulations 2018
- Act Code: SFA2001-S666-2018
- Legislation Type: Subsidiary legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289), sections 100(1) and 341
- Regulation Number: SL 666/2018
- Commencement: 8 October 2018
- Status: Current version (as at 27 Mar 2026)
- Key Provisions (from extract): Regulation 2 (definitions); Regulation 3 (margin requirements); Regulation 4 (offences)
- Schedule: Minimum margin requirements for contracts for differences and spot foreign exchange contracts for leveraged foreign exchange trading
What Is This Legislation About?
The Securities and Futures (Margin Requirements for Exempt Financial Institutions) Regulations 2018 (“Margin Requirements Regulations”) impose prudential margining rules on a specific category of market participants: exempt financial institutions. In plain terms, the Regulations require these institutions to collect and maintain minimum collateral (“margin”) from their customers when the institution deals in certain high-risk, leveraged products—specifically contracts for differences (CFDs) and spot foreign exchange contracts for leveraged foreign exchange trading.
The policy objective is risk containment. CFDs and leveraged FX trading can amplify losses quickly, and inadequate collateral can expose both customers and the broader financial system to counterparty and market risk. By mandating minimum margin levels and specifying what counts as “acceptable collateral,” the Regulations aim to ensure that customer exposures are sufficiently covered on an ongoing basis.
Although the Regulations apply to “exempt financial institutions,” they do not apply to all market intermediaries. The exemption is tied to the Securities and Futures Act licensing framework: an entity may be exempt from holding a capital markets services licence under specified provisions of the Act, but if it still carries on relevant regulated activities (here, dealing in CFDs or leveraged FX), it must comply with these margin requirements.
What Are the Key Provisions?
1. Definitions and product scope (Regulation 2)
The Regulations define several terms that are central to compliance. Most importantly, they define a “contract for differences” as an over-the-counter derivatives contract traded on a margin basis, intended to secure profit or avoid loss by reference to fluctuations in the value/price of underlying things or an index of underlying things, and which does not involve actual taking or physical delivery of the underlying. This definition is crucial because it distinguishes CFDs from physically settled contracts and helps determine whether a product falls within the margin regime.
They also define “exempt financial institution” as a person exempted under section 99(1)(a), (b) or (c) of the Securities and Futures Act from the requirement to hold a capital markets services licence. The definition of “customer” is also important: it includes persons on whose behalf the institution carries on regulated activity or with whom it enters into transactions as principal, but it excludes accredited investors, expert investors, and institutional investors. Practically, this means the margin rules are directed at retail and non-institutional counterparties, not at the excluded investor categories.
2. Core margin obligation (Regulation 3(1))
The heart of the Regulations is Regulation 3. Under Regulation 3(1), an exempt financial institution dealing in CFDs or spot foreign exchange contracts for leveraged exchange trading must obtain from its customers margin that meets the minimum margin requirements for each relevant contract it enters into with customers.
This is not a one-off requirement. The obligation is contract-by-contract: the institution must ensure that the margin collected satisfies the minimum requirements in respect of each contract. The minimum levels are set out in the Schedule, which specifies minimum margin requirements for CFDs and leveraged FX spot contracts. For practitioners, the Schedule is therefore not optional background—it is the quantitative benchmark that operational teams must implement in margin calculation systems.
3. Transitional compliance for existing business (Regulation 3(2))
Recognising that some institutions may already have been dealing in these products before the Regulations commenced, Regulation 3(2) provides a transitional pathway. If an exempt financial institution was carrying on such business immediately before 8 October 2018, it need not comply with the margin obligation immediately. However, it must comply on and after 8 October 2019 by obtaining minimum margin for:
- contracts entered into before 8 October 2019 that remain in force on or after that date; and
- contracts entered into on or after 8 October 2019.
For compliance officers, this transitional clause affects how legacy positions are handled. It also creates a clear timeline for when margin must be collected for outstanding contracts, which is critical for risk management and customer communications.
4. Form of margin and margin top-up mechanics (Regulations 3(3)–(4))
The Regulations require that minimum margin must be in the form of “acceptable collateral” (Regulation 3(3)). This is a key operational requirement: institutions cannot accept any collateral they choose; they must accept only those assets enumerated in the definition.
Regulation 3(4) then imposes a margin call obligation. If the current market value of acceptable collateral in the customer’s trading account falls below the minimum margin requirements, the institution must:
- contact the customer immediately; and
- inform the customer to provide additional acceptable collateral to make good the shortfall in value within 2 business days after being so informed.
This provision is significant because it sets both the trigger (market value below minimum) and the deadline (2 business days). It also implies that institutions must monitor collateral values continuously or at sufficiently frequent intervals to identify shortfalls promptly.
5. Acceptable collateral—detailed eligibility criteria (Regulation 3(5))
The definition of “acceptable collateral” is extensive and includes categories such as cash, gold, specified equities and convertible bonds, debt securities with specified credit ratings, and certain collective investment schemes and exchange-traded funds (ETFs), among others. The Regulations also include a mechanism allowing the Monetary Authority of Singapore (MAS) to specify other products or instruments by notice published on its website.
From a practitioner’s perspective, the most important compliance takeaway is that acceptable collateral is not merely “liquid”; it is eligibility-based and often rating- or listing-dependent. For example, debt securities must meet long-term or short-term rating thresholds from specified rating agencies (Fitch, Moody’s, and Standard & Poor’s). Similarly, certain shares must be included in a “market index” of a recognised group A exchange or issued by corporations meeting a shareholders’ funds threshold.
These constraints require institutions to maintain robust eligibility checks, including verifying index inclusion, issuer financial thresholds, and credit ratings. They also require ongoing monitoring because ratings can change and market indices can be reconstituted.
6. Offences (Regulation 4)
While the extract only begins to show Regulation 4, it indicates that a person who contravenes Regulation 3(1), (2), (3) or (4) commits an offence. In practice, this means failure to obtain minimum margin, failure to comply with transitional requirements, acceptance of non-acceptable collateral, or failure to issue and enforce margin top-ups within the required timeframe can expose the institution (and responsible individuals, depending on enforcement approach) to criminal or regulatory consequences as provided under the Securities and Futures Act framework.
How Is This Legislation Structured?
The Regulations are structured in a straightforward format:
- Part/Regulation 1: Citation and commencement (8 October 2018).
- Regulation 2: Definitions, including key terms such as “contract for differences,” “exempt financial institution,” “customer,” and “acceptable collateral.”
- Regulation 3: The substantive margin requirements, including the margin obligation, transitional compliance, acceptable collateral, and margin call mechanics.
- Regulation 4: Offences for contravention of specified margin-related obligations.
- The Schedule: The quantitative minimum margin requirements for CFDs and spot foreign exchange contracts for leveraged foreign exchange trading.
For legal and compliance teams, the Schedule is effectively the “numbers” behind Regulation 3. The Regulations therefore operate as a combined instrument: Regulation 3 sets the duty and mechanics, while the Schedule sets the minimum margin levels that must be calculated and collected.
Who Does This Legislation Apply To?
The Regulations apply to exempt financial institutions—entities exempted from holding a capital markets services licence under section 99(1)(a), (b) or (c) of the Securities and Futures Act. The obligation is triggered when the institution deals in CFDs or spot foreign exchange contracts for leveraged exchange trading.
The margin obligation is owed to “customers” as defined. Importantly, the definition excludes accredited investors, expert investors, and institutional investors. Accordingly, the Regulations are primarily aimed at margining exposures to customers who are not within those higher-capacity investor categories.
Why Is This Legislation Important?
This legislation is important because it operationalises a core investor-protection and systemic-risk principle: leveraged trading must be backed by sufficient collateral. By requiring minimum margin for each relevant contract and specifying acceptable collateral, the Regulations reduce the likelihood that customer losses or counterparty failures will be exacerbated by inadequate collateral buffers.
From an enforcement and compliance standpoint, the Regulations also create clear, measurable duties. Margin must be obtained to meet minimum requirements; collateral must be eligible; and margin shortfalls must be addressed within a defined timeline (2 business days). These are not vague standards; they are compliance checkpoints that can be audited through account records, collateral registers, and margin calculation logs.
For practitioners advising exempt financial institutions, the practical impact is substantial. Institutions must ensure their product governance, onboarding documentation, margin calculation methodology, collateral management systems, and customer communications processes are aligned with the Regulations and the Schedule. They must also ensure that any transitional handling of legacy contracts is completed by the relevant dates and that ongoing monitoring triggers timely margin calls.
Related Legislation
- Securities and Futures Act (Cap. 289) (authorising provisions: sections 100(1) and 341; exemption framework: section 99(1))
- Securities and Futures (Financial and Margin Requirements for Holders of Capital Markets Services Licences) Regulations (referred to for concepts such as recognised group A exchanges and for cross-referenced tables)
- Futures Act (listed in metadata as related)
- Timeline (listed in metadata as related)
- Town Councils Act (listed in metadata as related—relevance may be contextual to the platform’s cross-references)
Source Documents
This article provides an overview of the Securities and Futures (Margin Requirements for Exempt Financial Institutions) Regulations 2018 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.