FUTURES TRADING (AMENDMENT) BILL

Order for Second Reading read. 2.04 pm

The Deputy Prime Minister (BG Lee Hsien Loong): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

In moving the Second Reading of the Securities Industry (Amendment) Bill just now, I explained the importance that investors place on sound regulations, and on the proper enforcement of these regulations. I also described how the lack of investor confidence would have a detrimental effect on our financial markets, and consequently the real economy. Although the focus there was on the cash market, the same considerations apply in the derivatives market. The amendments proposed in this Bill are a subset of those that we had considered earlier.

The main amendment is the proposed new Part VIIA of the Act, which enhances the level of regulatory cooperation between MAS and other futures regulators. I have already explained the significance of this international cooperation for our development as an international financial centre. Besides this, the Bill proposes a new section 21A which gives MAS the authority to issue written notices to holders of licences under the Futures Trading Act. The Bill also proposes to amend some of the current provisions concerning the fidelity fund in order to extend the coverage of the fund to include the financial default of members of the Exchange that are licensed by MAS. Finally, the Bill proposes to raise the maximum stipulated fines for Part VIII of the Act, which covers trading offences such as bucketing. At present, the sum is $100,000. This will be increased to $250,000 for an individual and $500,000 for a body corporate.

Members will notice, however, that the new civil actions for insider trading are not found in this Bill. This is because insider trading itself is not presently proscribed by the Futures Trading Act, which governs the derivatives market. We are aware that jurisdictions like Australia have made insider trading an offence under their futures legislation. With the proliferation of new financial instruments, futures contracts, for example, stock index futures, can theoretically be affected by specific corporate information. So it is possible for insider trading to take place involving derivatives instrument.

Looking forward, we may therefore also want to make insider trading a crime in our derivatives markets. MAS is still studying the matter. We are considering streamlining our securities and futures legislation, and combining both into a single omnibus Act. This will be a natural consequence of the demutualisation and merger of SES and SIMEX, and the worldwide convergence of the cash and derivatives markets. Such combined legislation will provide a unified framework for dealing with insider trading on both the cash and derivatives markets.

It may take us one or two years to prepare omnibus legislation. Until we take this next step, the present amendments will keep us in touch with current developments in the capital markets.

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. - [BG Lee Hsien Loong].

Bill considered in Committee.

[Mr Speaker in the Chair]

Clause 1 -

The Chairman: The citation year "1999" will be changed to "2000".

Clause 1 ordered to stand part of the Bill.

Clauses 2 to 12 inclusive ordered to stand part of the Bill.

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