Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 25) Regulations 2004
- Act Code: SFA2001-S764-2004
- Legislative Type: Subsidiary legislation (SL)
- Authorising Act: Securities and Futures Act (SFA) (notably section 337(1))
- Regulation Number: SL 764/2004
- Citation: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 25) Regulations 2004
- Commencement: 23 December 2004
- Status: Current version as at 27 March 2026 (per the legislation portal)
- Key Provisions:
- Section 1: Citation and commencement
- Section 2: Definitions (“Bonds”, “stabilising action”)
- Section 3: Exemption from sections 197 and 198 of the SFA for specified stabilising action
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 25) Regulations 2004 (“Stabilising Exemption Regulations”) is a targeted regulatory instrument made under the Securities and Futures Act 2001 (“SFA”). In plain language, it creates a narrow exemption that allows certain market participants to take “stabilising action” in relation to a specific bond issue, without being caught by particular market conduct prohibitions in the SFA.
The regulations are not a general authorisation for any stabilisation activity in any bond. Instead, they are issue-specific and participant-specific. They define the relevant “Bonds” very precisely and define “stabilising action” by reference to actions taken by Merrill Lynch International (and related corporations). The exemption is also time-limited: it applies only within 30 days from the date of issue of the Bonds.
Practically, the regulations recognise that stabilisation—when properly structured and limited—can help manage early trading volatility around a new bond issuance. However, stabilisation can resemble conduct that market conduct rules would otherwise prohibit (for example, conduct that could be characterised as creating artificial price movements). The exemption therefore provides legal certainty for stabilising activities that meet the defined conditions.
What Are the Key Provisions?
Section 1 (Citation and commencement) is straightforward. It provides the short title and states that the Regulations come into operation on 23 December 2004. For practitioners, this matters mainly for confirming the regulatory framework applicable at the time the bond issuance and stabilisation activities occurred.
Section 2 (Definitions) is the core of the instrument because it tightly constrains both the subject matter and the permitted activity. Two definitions are crucial:
- “Bonds” are defined as the 5-year zero coupon convertible bonds due December 2009 issued by International Bank of Taipei for a principal amount of up to US$180 million. These bonds are convertible into common shares of International Bank of Taipei with a par value of NT$10 each.
- “stabilising action” means an action taken in Singapore or elsewhere by Merrill Lynch International (or any of its 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.
From a legal risk perspective, these definitions are doing most of the work. If the instrument is not the specified bond issue, the exemption does not apply. If the stabilising activity is not taken by Merrill Lynch International or its related corporations, the exemption does not apply. If the purpose is not to stabilise or maintain the market price, the exemption may not apply even if the action involves buying or offering to buy.
Section 3 (Exemption) is the operative provision. It states that sections 197 and 198 of the SFA shall not apply to any stabilising action taken in respect of any of the Bonds, within 30 days from the date of issue, with respect to stabilising action taken by either:
- a person referred to in section 274 of the Act; or
- a sophisticated investor as defined in section 275(2) of the Act.
Although the text provided does not reproduce sections 197, 198, 274, and 275(2), the structure indicates that the SFA contains market conduct prohibitions (sections 197 and 198) that could otherwise restrict or criminalise certain trading behaviours. The exemption is drafted to carve out stabilising action within the specified window and only when undertaken by the specified categories of persons (section 274 persons and sophisticated investors).
For practitioners, the practical compliance question becomes: Does the stabilising activity fall within the defined “stabilising action” and is it taken within the 30-day period, and by a qualifying person? If any element fails—wrong bond issue, wrong participant, wrong purpose, or wrong timing—then the exemption will not protect the conduct, and the general SFA prohibitions may apply.
How Is This Legislation Structured?
The Regulations are structured as a short instrument with an enacting formula and three substantive provisions:
- Section 1: Citation and commencement.
- Section 2: Definitions that specify the relevant bond issue and the meaning of stabilising action.
- Section 3: The exemption clause, specifying that sections 197 and 198 of the SFA do not apply to qualifying stabilising action within a 30-day period, and only when taken by qualifying persons (section 274 persons or sophisticated investors).
There are no additional parts or schedules in the extract, reflecting the Regulations’ narrow scope: they are designed to address a specific stabilisation scenario rather than to create a broad regulatory regime.
Who Does This Legislation Apply To?
On its face, the Regulations apply to stabilising action relating to the defined Bonds. The definition of stabilising action limits the activity to actions taken by Merrill Lynch International or its related corporations to buy (or offer or agree to buy) the Bonds for the purpose of stabilising or maintaining market price.
However, the exemption in section 3 further narrows the protected conduct by requiring that the stabilising action be taken within 30 days from the date of issue and be taken by a person referred to in section 274 of the SFA or by a sophisticated investor as defined in section 275(2). In practice, this means that even if Merrill Lynch (or a related corporation) engages in stabilisation, the exemption’s availability will depend on whether the stabilising activity is carried out in a manner that fits within the qualifying person categories under the SFA.
Accordingly, the Regulations are most relevant to: (i) the lead managers/arrangers and their affiliates involved in the bond issuance; (ii) trading desks executing stabilisation trades; and (iii) legal and compliance teams assessing whether stabilisation trades might otherwise breach SFA market conduct prohibitions.
Why Is This Legislation Important?
This instrument is important because it provides legal certainty for a specific type of market activity—stabilisation—during the early phase of a bond issuance. Without an exemption, trading activity that involves buying or offering to buy in a way that affects price could be argued to fall within prohibitions on market manipulation or improper market conduct. The Regulations therefore help reconcile two policy objectives: maintaining fair and orderly markets while allowing legitimate stabilisation practices.
For practitioners, the key value lies in the precision of the exemption. The Regulations are not open-ended. They are limited by: (1) the exact bond issue; (2) the identity of the stabilising actor (Merrill Lynch International and related corporations); (3) the purpose (stabilise or maintain market price); and (4) the timing (within 30 days from issue). This precision reduces ambiguity and supports defensible compliance decisions.
From an enforcement and litigation standpoint, the exemption also signals how regulators expect stabilisation to be handled: stabilisation is permissible only when it is structured within defined boundaries. If a stabilisation programme exceeds those boundaries—such as trading beyond the 30-day window or involving non-qualifying parties—then the exemption will not shield the conduct, and the general SFA prohibitions in sections 197 and 198 may be engaged.
Related Legislation
- Securities and Futures Act 2001 (especially sections 197, 198, 274, 275(2), and the regulation-making power in section 337(1))
- Futures Act (listed in the provided metadata as related legislation)
- Stabilising Act (listed in the provided metadata as related legislation)
- Timeline (legislation timeline reference on the portal)
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. 25) Regulations 2004 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.