Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 2) Regulations 2004
- Act Code: SFA2001-S98-2004
- Type: Subsidiary Legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289) (“SFA”)
- Enacting power: Section 337(1) of the SFA
- Commencement: 4 March 2004
- Legislation status: Current version as at 27 March 2026 (per the provided extract)
- Legislative instrument number: SL 98/2004
- Key provisions: Section 1 (citation and commencement), Section 2 (definitions), Section 3 (exemption)
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 2) Regulations 2004 (“Stabilising Action (Bonds) Regulations”) creates a targeted regulatory exemption from certain market conduct restrictions under the Securities and Futures Act. In practical terms, it allows specified market participants to undertake “stabilising action” in relation to a particular bond issuance without triggering the prohibitions that would otherwise apply.
Stabilising action is a common feature of certain capital markets transactions. It is intended to support orderly trading and reduce excessive price volatility immediately following issuance. However, stabilisation can also resemble conduct that market conduct rules seek to prevent—such as manipulative or misleading trading. The Regulations therefore strike a balance: they permit stabilisation, but only within defined boundaries and only for a specified set of bonds and persons.
Scope-wise, the Regulations are narrow and transaction-specific. They define “Bonds” as fixed rate bonds due March 2011 issued by National Thermal Power Corporation Limited for up to US$200 million. They also define “stabilising action” by reference to particular financial institutions (ABN AMRO Bank N.V., Merrill Lynch (Singapore) Pte. Ltd., and their related corporations). The exemption is further limited by a time window—no stabilising action after 30 calendar days from the date of issuance.
What Are the Key Provisions?
Section 1 (Citation and commencement) provides the formal name of the Regulations and states that they come into operation on 4 March 2004. For practitioners, this matters when assessing whether stabilising conduct occurred within the legal framework and whether any compliance obligations were in force at the relevant time.
Section 2 (Definitions) is central because the exemption depends entirely on whether the conduct falls within the defined terms. The Regulations define:
(i) “Bonds” as the fixed rate bonds due March 2011 issued by National Thermal Power Corporation Limited for a principal amount of up to US$200 million; and
(ii) “stabilising action” as an action taken in Singapore or elsewhere by ABN AMRO Bank N.V., Merrill Lynch (Singapore) Pte. Ltd., or any of their related corporations, to buy, or to offer or agree to buy any of the Bonds in order to stabilise or maintain the market price of the Bonds in Singapore or elsewhere.
Two practical points follow from these definitions. First, the exemption is bond-specific: it does not generalise to other issuers or other bond series. Second, the exemption is person-specific: only the named institutions and their related corporations can rely on the exemption for the defined stabilising activities. If a different dealer or affiliate undertakes similar conduct, the exemption may not apply.
Section 3 (Exemption) is the operative provision. It provides that, subject to paragraph (2), sections 197 and 198 of the SFA shall not apply to stabilising action carried out in respect of any of the Bonds with either:
- (a) a person referred to in section 274 of the SFA; or
- (b) a sophisticated investor as defined in section 275(2) of the SFA.
Although the extract does not reproduce sections 197, 198, 274, and 275(2), the structure indicates that the SFA’s market conduct prohibitions would otherwise apply to trading or dealing. The Regulations carve out stabilising action from those prohibitions, but only when the stabilising trades are carried out with the specified categories of counterparties—namely, persons within the section 274 category and sophisticated investors under section 275(2).
Counterparty limitation is therefore a compliance-critical feature. A stabilising programme that trades with retail investors (or other persons outside the defined categories) may not be covered by the exemption. For legal review, counsel should map the intended counterparties against the SFA definitions referenced by the Regulations and document that the trades were executed with eligible counterparties.
Section 3(2) (Time limitation) further restricts the exemption: paragraph (1) “shall not apply” to stabilising action carried out at any time after the expiry of the 30 calendar days from the date of issuance of the Bonds. This is a bright-line rule. Even if the stabilising trades are with eligible counterparties and undertaken by eligible institutions, stabilisation beyond the 30-day period would fall outside the exemption and would therefore be subject to the SFA provisions that the exemption otherwise disapplies.
In practice, this time limitation requires transaction teams to implement operational controls—such as monitoring trade dates, ensuring that stabilisation orders are not executed outside the permitted window, and retaining evidence of the issuance date and the dates of stabilising trades.
How Is This Legislation Structured?
The Regulations are structured in a simple, short format typical of targeted exemptions:
- Section 1 sets out the citation and commencement date.
- Section 2 provides definitions that determine the scope of the exemption—particularly the definitions of “Bonds” and “stabilising action”.
- Section 3 contains the exemption, including both the counterparty limitation (section 3(1)) and the time limitation (section 3(2)).
There are no additional parts or schedules in the extract. The legal effect is therefore concentrated in Section 3, with Section 2 doing the essential scoping work.
Who Does This Legislation Apply To?
The Regulations apply to stabilising action in relation to the defined “Bonds” and, by definition, to stabilising action undertaken by ABN AMRO Bank N.V., Merrill Lynch (Singapore) Pte. Ltd., or their related corporations. Accordingly, the exemption is relevant primarily to the dealers, banks, and their corporate groups that may participate in stabilisation activities for this specific bond issuance.
However, the exemption also depends on who the stabilising trades are with. Section 3(1) limits the exemption to stabilising action carried out with persons referred to in section 274 of the SFA or with sophisticated investors as defined in section 275(2) of the SFA. Therefore, even where an eligible institution undertakes stabilising action, the exemption may not apply if the counterparty does not fall within those categories.
Why Is This Legislation Important?
For practitioners, the key significance of these Regulations lies in how they operationalise the SFA’s market conduct framework for capital markets transactions. Stabilisation can be legitimate and beneficial for market functioning, but it sits close to the boundary of conduct that market conduct rules are designed to police. This instrument provides legal certainty by disapplying specified SFA provisions (sections 197 and 198) for stabilising action that meets defined conditions.
From a compliance perspective, the Regulations highlight three “gates” that must all be satisfied:
- Transaction gate: the stabilisation must relate to the defined bond issuance (National Thermal Power Corporation Limited fixed rate bonds due March 2011, up to US$200 million).
- Participant gate: the stabilising action must be undertaken by the named institutions or their related corporations.
- Deal gate: stabilising trades must be with eligible counterparties (section 274 persons or sophisticated investors under section 275(2)).
Additionally, the time gate is decisive: stabilisation must occur within 30 calendar days from issuance. These conditions collectively determine whether the exemption is available.
Enforcement risk is therefore concentrated on deviations from the defined scope. If stabilising action is undertaken after the 30-day period, or if trades are executed with ineligible counterparties, the exemption would not apply and the underlying SFA market conduct provisions would be engaged. Counsel advising issuers, arrangers, and dealers should therefore treat this instrument as a compliance checklist and ensure that trading documentation, internal approvals, and trade reporting align with the exemption’s conditions.
Related Legislation
- Securities and Futures Act (Cap. 289) — in particular, sections 197, 198, 274, 275(2), and the regulation-making power in section 337(1)
- Futures Act (as referenced in the provided metadata)
- Stabilising Act (as referenced in the provided metadata)
- Legislation Timeline (for version control and amendment history)
Source Documents
This article provides an overview of the Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 2) Regulations 2004 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.