COMMODITY TRADING (AMENDMENT) BILL

COMMODITY TRADING (AMENDMENT) BILL: Order for Second Reading read.

3.07 pm

The Minister for Trade and Industry (Mr Lim Hng Kiang): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Objective

Commodity futures trading is currently regulated under the Commodity Trading Act (CTA) by IE Singapore, while financial futures trading is regulated by MAS under the Securities and Futures Act (SFA) and

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the Financial Advisers Act (FAA). Accordingly, commodity futures and the associated markets, clearing facilities, brokers and advisers are regulated under the CTA while their equivalents in respect of financial futures are regulated under the SFA and FAA.

As markets converge and institutions participate in both financial and commodity futures markets, the presence of multiple regulators increases regulatory costs. To enhance Singapore's business environment and streamline regulations, we propose that legislative amendments be made to transfer regulatory oversight of commodity futures trading from IE Singapore under the CTA, to MAS under the SFA and FAA. The consolidation of the regulation of financial and commodity futures under a single regulator, the MAS, is a strategic step that will facilitate Singapore's growth as a futures trading hub. This would streamline licensing and compliance procedures. For example, firms broking both commodity futures and financial futures would only need to hold a single licence from MAS, as opposed to the current requirement of obtaining two separate licences from MAS and IE Singapore.

IE Singapore and MAS have consulted the public and industry players on the proposed transfer of regulatory oversight. The feedback received indicated support for MAS to be the single regulator for futures trading activities.

Legislative amendments required to effect the transfer

This Bill seeks to amend the CTA, SFA and FAA to effect the transfer of regulatory oversight of commodity futures, including the associated markets, clearing facilities, brokers and advisers, from IE Singapore under the CTA, to MAS under the SFA and the FAA. The key amendments include:

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(1) Removing all provisions in the CTA relating to commodity futures trading; and

(2) Amending the definition of "commodity" in the SFA and introducing a definition of "commodity" in the FAA such that commodity futures contracts currently regulated under the CTA will be regulated under the SFA and FAA.

The Bill also makes a consequential amendment to the Income Tax Act to clarify that members of commodity futures markets can continue to qualify for tax incentives after the transfer.

With these amendments, commodity futures, the associated markets, clearing facilities, brokers and advisers will come within the regulatory ambit of the SFA and the FAA. This will achieve the objective of having a single regulatory framework for commodity futures and financial futures contracts.

Transitional arrangements

The proposed changes will affect those entities and their representatives currently dealing in commodity futures. These include the Singapore Commodity Exchange Ltd (SICOM), SICOM's broking members and their representatives, as well as futures brokers and their representatives who have licences from both IE Singapore and MAS. Where appropriate, MAS will provide transitional arrangements to facilitate their smooth transfer from regulatory oversight under IE Singapore to MAS. To this end, the Bill includes consequential amendments to the SFA and the FAA that will empower MAS to prescribe transitional regulations for the transfer of oversight.

Regulatory status of over-the-counter commodity derivatives and spot commodity contracts

Under present legislation, IE Singapore also has regulatory oversight of over-the-

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counter (OTC) commodity derivatives and spot commodity contracts under the CTA. These were added to the scope of the CTA in 2001 and a licensing framework was introduced, to keep out bucket shops that defraud the public. The intention was not, however, to impede legitimate dealing in OTC commodity derivatives and commodity spot broking. To this end, IE Singapore has granted exemptions from the licensing requirement to bona fide players operating in institutional markets. As the current regime continues to serve its purpose, we do not propose any changes to the regulatory framework for OTC commodity derivatives and spot commodity contracts under the revised CTA. We will continue to monitor market developments and ensure that our regulatory regime is kept relevant and effective.

Conclusion

Mr Speaker, Sir, the proposed amendments under the Commodity Trading (Amendment) Bill are necessary to effect the transfer of regulatory oversight of commodities futures from the CTA to the SFA and FAA. This will consolidate regulation of commodities and financial futures trading under MAS. As a result, there will be a more efficient and streamlined regulatory framework under which trading players can operate and conduct their futures trading activities in Singapore. This demonstrates the commitment of the Singapore Government to continually enhance the business operating environment in Singapore.

Sir, I beg to move.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [Mr Lim Hng Kiang].

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Bill considered in Committee; reported without amendment; read a Third time and passed.