Tuesday, August 12, 2014

Consultation Paper on Proposals to Enhance Regulatory Safeguards for Investors in Capital Markets

The Monetary Authority of Singapore (‘MAS’) has released a consultation on proposals to enhance regulatory safeguards for investors in capital markets with three major drives. First, MAS proposes to extend the regulatory safeguards to retail investors to non-conventional products that are similar to regulated capital markets products: Buy-back arrangements involving precious metals are proposed to be considered debentures. The scope of collective investment schemes (‘CIS’) is proposed to be extended to products that do not pool contributions but assets are managed as a whole and thus pooled in effect. Second, MAS proposes to introduce a complexity risks rating for investment products sold to retail investors that introduces ratings along two separate dimensions: (1) the complexity of structure and (2) the risk of loss of initial principal investment. Third, MAS proposes amendments to investor qualifications. Most importantly, MAS proposes to also consider investors who meet the criteria as accredited investors (‘Eligible Investors’) as retail investors unless they opt in to be classified as accredited investors (‘AI’). In addition, MAS proposes slight amendments to the requirements for AI / Eligible Investors and institutional investors (‘IIs’) as well as the elimination of the category of expert investors (‘EIs’). 

Comments can be submitted to the MAS until 1 September 2014. For more information, please read our regulatory update on the Consultation Paper on Proposals to Enhance Regulatory Safeguards for Investors in Capital Markets.


Friday, August 1, 2014

MAS Consultation Paper on Proposed Amendments to AML/CFT Notices

The Monetary Authority of Singapore (‘MAS’) has released a consultation paper on proposed amendments to its Notices to Financial Institutions (‘FIs’) on Anti-Money Laundering and Countering the Financing of Terrorism (‘AML/CFT Notices’).

Adding greater emphasis to a risk-based approach (‘RBA’), capital markets intermediaries (‘CMIs’) will be required to perform a general risk assessment regarding their money laundering and terrorism financing risk. A similar risk assessment must be performed for new products, new business practices and the use of new technologies.

Many of the proposed changes formalise existing supervisory expectations and practices for CMIs. In particular, the revised regulations elaborate on the steps CMIs should take to identify and verify non-individual customers, such as companies and trusts, and their beneficial owners and formalise the screening of customers and their connected parties. CMIs are to ensure that enhanced customer due diligence (‘CDD’) requirements are also applied to the family members and close associates of Politically Exposed Persons (‘PEPs’) and greater emphasis is given to the country and jurisdiction where the client is from or in and related qualifications by the Financial Action Task Force (‘FATF’). New regulations are introduced when CMIs provide correspondent services to foreign FIs. Within financial groups, the exchange of information for anti-money laundering (‘AML’) and countering the financing of terrorism (‘CFT’) is strongly encouraged.

Tuesday, July 29, 2014

OIS Discounting and Counterparty Credit Risk Workshops 17/18 Sept 2014

Ben Watson, a well-known and much sought-after subject-matter expert in the Asia-Pacific region, will be conducting workshops on OIS Discounting and Counterparty Credit Risk this September.

Click here for more information and to book your place.

For information on MAS FTS funding and CPD hours, click here.

Tuesday, July 8, 2014

Securities and Futures (Reporting of Derivatives Contracts) (Exemptions) Regulations 2014

Under the Securities and Futures Act and the Securities and Futures (Reporting of Derivatives Contracts) Regulations 2013, banks, finance companies, insurers, holders of a capital markets services (‘CMS’) licence, and approved trustees must report specified information on specified derivatives contracts, currently interest rate derivatives contracts and credit derivatives contracts, that are booked or traded in Singapore to a licensed trade repository within two business days after the execution, termination or a change in the specified data.

The Monetary Authority of Singapore (‘MAS’) has just exempted the following types of entities from such reporting in the Securities and Futures (Reporting of Derivatives Contracts) (Exemptions) Regulations:
  • Licensed fund management companies (‘LFMCs’) whose assets under management do not exceed SGD 8bn; and
  • Trustees of collective investment schemes (‘CIS’) managed by a LFMC exempt from derivatives reporting, by a registered fund management company (‘RFMC’) or by a person who is not subject to the derivatives reporting obligation.
These exemptions entered into effect on 1 July 2014. For more information, please read our regulatory update on the Securities and Futures (Reporting of Derivatives Contracts) (Exemptions) Regulations 2014.

Wednesday, July 2, 2014

Amendments to MAS Notices on Prevention of Money Laundering and Countering the Financing of Terrorism ('AML/CFT')

The Monetary Authority of Singapore (‘MAS’) has revised the MAS Notices on Prevention of Money Laundering and Countering the Financing of Terrorism (‘MAS AML/CFT Notices’). The amendments clarify financial institutions’ (‘FIs’) obligations under the anti-money laundering (‘AML’) and countering the financing of terrorism (‘CFT’) requirements in relation to the Personal Data Protection Act (‘PDPA’).

FIs may collect, use and disclose personal data without customer consent in the course of performing customer due diligence (‘CDD’). Moreover, FIs only need to provide access to and the option to correct personal data limited to factual information on the identity of the individual and information provided by the individual.

Friday, June 27, 2014

High-Frequency Trading

High-frequency trading (‘HFT’) has become a frequently bandied about term in the financial system in recent years. In this technologically-advanced age, the increased use of computers is evident for all to see, and through HFT, the role computers play has become even more profound that ever before. In 2009, HFT orders accounted for more than 50% of exchange volume in the market and as much as two-thirds of all stock trades in the U.S. from 2008 to 2011 were executed by high-frequency firms using sophisticated technology.

HFT is a type of algorithmic trading which employs the use of powerful computers to transact a large number of orders at very high speeds. It uses complex algorithms to study multiple markets and executes orders based on market conditions. HFT utilises highly sophisticated proprietary trading strategies carried out by computers to allow traders to move in and out of positions within mere seconds. In other words, traders with the fastest execution speeds will be more profitable than their slower counterparts. HFT has brought about a high level of efficiency and efficacy in the trading of stocks, and has become a vital cog in the rapidly moving financial industry.

However, HFT has become an area of concern of the investing public ever since the May 6, 2010 Flash Crash where it contributed to volatility when high-frequency liquidity providers rapidly withdrew from the market. Risk controls in HFT are also less stringent because of competitive time pressure to execute trades which are done without the extensive safety checks normally used in slower trades. Instances whereby trading firms experienced errant algorithms which reduced the likelihood of profitable trades to be executed have also happened in the past.

There have also been cases of a new type of insider trading occurring as a result of HFT, most notably, in the New York Stock Exchange (NYSE) probe by the Federal Bureau of Investigation (FBI) in June this year. The FBI is looking into allegations that the Exchange had provided customers with an advantage of more than 1,000 microseconds over other customers to the market data they used to make high-frequency trades. Given that it only takes these “preferred data customers” a handful of microseconds to cancel orders and execute trades, this was more than ample time for them to generate huge profits from the advance information they had received.

The financial system has undergone a transformation with the advent of HFT, and with this lies the need for controls to mitigate these new risks. Several European countries have proposed curtailing HFT to have at least a modicum of control over the trading practices of high-frequency traders amid concerns of volatility. The US Securities and Exchange Commission (SEC) has also recently announced new measures to promote fairness for investors and bolster the stability of HFT.

The measures proposed include an "anti-disruptive trading" rule to control aggressive short-term trading by high-frequency traders during vulnerable market conditions, and a plan to force more proprietary trading firms to register with regulators and open their books for inspection. The SEC is also working on measures to improve how trading firms manage risks around their use of computer algorithms.

Thursday, June 26, 2014

Model Validation, Control and Governance Workshop

Finance is a Risky Business

While no financial institution can afford to ignore the risks inherent in this industry, Model Risk is still an uncharted territory for many organizations.  Even the regulators, until recently, have not placed much emphasis on this area of risk management.  

Thursday, June 12, 2014

The Data Protection Regime pursuant to the Personal Data Protection Act 2012

The Personal Data Protection Act (‘PDPA’) and subsidiary regulations issued pursuant thereto govern the collection, use, disclosure and care of personal data by organisations. Organisations must notify individuals clearly of the purposes for which their personal data would be collected, used or disclosed on or before such collection, use or disclosure, and obtain consent. They should make reasonable efforts to verify that the personal data they hold is accurate, if they intend to use the personal data to make a decision about the individual, or to disclose the personal data. 

On request, individuals must be provided with their personal data and information about the ways in which such personal data has been or may have been used or disclosed within a year of such request. Any errors or omissions in the personal data must be corrected upon request. Organisations must protect the personal data they hold. They may transfer personal data to another country only according to the prescribed requirements and must cease retention of the personal data when it is no longer necessary for any business or legal purpose.

Persons sending marketing messages and making marketing calls to Singapore numbers must provide specified information regarding the sender. Marketing messages and calls to numbers listed in the Do Not Call (‘DNC’) Register are generally prohibited.

Organisations must make information about their data protection policies, practices and complaints process available on request and name a dedicated contact person.

For more information, please read our regulatory update on The Data Protection Regime pursuant to the Personal Data Protection Act 2012.

Monday, June 2, 2014

(Post-Event) Cross-Border Financial Services - Challenges & Solutions

The Cross-Border Financial Services - Challenges & Solutions talk held last month on the 8th of May hosted by Maroon was a rousing success with a packed audience in attendance at the RedDot BrewHouse. Our partners at BRP SA, a worldwide leader in the management of cross-border risk, presented the audience with the challenges financial institutions face in cross-border financial services and how to best manage their associated risks. 

Guests were able to enjoy great food and drinks as well as a fruitful networking session with a great view of the waters of Boat Quay at night. We hope everyone enjoyed the event as much as we did! Thanks for coming and we hope to see you again in future events. Click here for the photos, courtesy of our friends at G.R.A.C.E. Foundation.

Wednesday, May 28, 2014

Model Validation Conference 16-18 June 2014 in Singapore

Maroon will be appearing at the Model Validation, Control and Governance conference to be held in Singapore next month. A popular event in London for the past few years, this will be the first time it is coming to Asia.

We will be conducting the half-day Post-Conference Master Class on Wednesday 18th (and are willing to give a sneak peek in exchange for coffee - contact us for details).

Our software partner FINCAD is sponsoring the event to promote the recent launch of their new F3 Platform.

F3 Platform makes pricing and risk of complex derivatives easy. It is ideal for smaller banks, particularly like many of those in Asia, who need modern pricing techniques but lack the in-house quant skills to build or use a sophisticated analytics library.

New features include:

  • An adaptable trade database for storing term sheet details for products that don't fit in your main system;
  • Modern analytics and models capable of pricing, calculating risk and calculating OIS, CVA and more;
  • Distributed, multi-user architecture for consistent prices across front, middle and back office;
  • High performance through the patented Universal Risk Technology as well as a grid-enabled monte-carlo engine; and
  • Flexible interfaces that integrate easily with other trading systems.

Contacts us if you'd like to find out more about F3 Platform.




Friday, May 2, 2014

Cross-Border Financial Services


In 2009, UBS paid a fine of USD 780 million and entered into a deferred prosecution agreement with the US government. Although the charges focussed on tax offences, various aspects were under investigation how UBS provided financial services in the USA and to US clients. A number of other Swiss banks are still facing similar charges.

When financial institutions provide services to another jurisdiction, they must understand the respective local regulations. Most often the regulation of financial services focuses on domestic institutions, adding to the challenge. Once financial institutions realize the regulatory risks of their activities in other jurisdictions, they usually apply heavy restrictions in order to stay compliant and avoid investigations and fines by the local or even their home regulator. Potential activities become blocked. Expertise on the local regulations is required to analyse what activities may be performed and thus continue providing services.

In order to get the necessary detailed guidance, the financial institution must either perform onerous analysis itself or establish a network of local experts. Both approaches are costly and challenging. Maroon is proud to announce its co-operation with BRP Bizzozero & Partners SA (‘BRP SA’), a leading consultancy on cross-border financial services. Based on its network of local experts, BRP SA provides country manuals with detailed guidance on financial activities in more than 100 countries.

Monday, April 28, 2014

Cross-Border Financial Services - Challenges & Solutions

Businesses and all our lives are becoming increasingly global. In line with it, financial services are increasingly involving multiple jurisdictions: Loans are taken in one country to fund a project in another country, a wealthy individual holds accounts in an offshore jurisdictions, an investment recommendation sent by email to a foreign investor etc.

Financial institutions are obliged in all jurisdictions in which they are considered to be active. With the increasing internationalisation of their services, financial institutions must consider an increasing number of regulations to comply with. Knowing and keeping track of all these regulations is a major challenge for financial institutions.

Alessandro Bizzozero, Genevieve Berclaz and Patrick Genazzi, partners of BRP Bizzozero & Partners SA ('BRP SA') in co-operation with Maroon Analytics will introduce you to the challenges of cross-border financial services, approaches to properly manage such services and their associated risks.

Event Details:

Map
Cross-Border Financial Services – Challenges and Solutions

When: Thursday, 8th May 2014 
           @ 6.30pm-9pm
Where: RedDot BrewHouse
33/34 Boat Quay
Level 3 Function Room
Singapore (049823)

To RSVP your attendance, kindly contact:
Amir Shariff
Tel: 82670290

BRP Bizzozero & Partners SA ('BRP SA'), an independent company based in Geneva specialising in financial regulation and compliance, is a leader in the management of cross-border risk with a wide range of clients in Switzerland as well as globally. The company has ample experience and the special knowledge on cross-border activities and publishes renowned country manuals.

Alessandro Bizzozero is the founding partner of BRP SA and a lawyer, with over 20 years of experience in banking and regulatory practice. Genevieve Berclaz has extensive knowledge of regulatory risk management as a result of her experience working for the Financial Market Supervisory (FINMA). Patrick Genazzi is a specialist in the EU’s Markets in Financial Instruments Directive (MiFID) regulations.

Thursday, April 10, 2014

Securities and Futures (Reporting of Derivatives Contracts) Regulations 2013

Banks and subsidiaries of banks in Singapore, merchant banks, finance companies, insurers licensed in Singapore, approved trustees, any capital markets services (‘CMS’) licence holder, and significant derivatives holders must report specified information on interest rate derivatives contracts and credit derivatives contracts that are booked or traded in Singapore to a licensed trade repository within two business days after the execution, termination or a change in the specified data.

For more information, please read our regulatory update on the Securities and Futures (Reporting of Derivatives Contracts) Regulations 2013.

Tuesday, April 1, 2014

Technology Risk Management Notices and Guidelines

In June 2013, the Monetary Authority of Singapore ('MAS') has issued Notices and Guidelines on Technology Risk Management ('TRM'). Financial Institutions ('FIs') must review their technology systems and processes and evaluate how to effectively implement adequate technology risk measures in order to protect their IT.
 
The TRM Guidelines are statements of industry best practices which MAS expects FIs to adopt taking into account the diverse activities they engage in and the markets in which they conduct transactions. In contrast, all FIs must fully comply with the TRM Notice by 1 July 2014; in particular they must
  • put in place a framework and process to identify Critical Systems;
  • ensure that the maximum unscheduled downtime for each Critical System does not exceed a total of 4 hours within any period of 12 months and that every Critical System is restored within 4 hours and recovery procedures shall be tested every 12 months;
  • notify MAS not later than 1 hour upon the discovery of a Relevant Incident and a root cause and impact analysis report submitted to MAS, within 14 days;
  • implement IT controls to protect customer information from unauthorised access or disclosure.

Monday, March 31, 2014

Random Walkers - Thu 3rd April

Singapore's only Quant Finance Social event will convene again this month on Thursday 3rd April.

Join quants from banks, funds and academia to talk about all things quant or not and where the highest levels of liquidity can be found in a pint glass.

We are considering a new venue, so please come along and let us know your thoughts.

Date: Thursday 3rd April 2014

Time: 6:30pm onwards

Place: The Bull and Bear, 33 Pekin Street, Singapore 048671
+65 6557 0879
www.bullandbear.com.sg

Monday, March 3, 2014

MAS Expanding Exemptions from Total Debt Servicing Ratio

The Monetary Authority of Singapore (‘MAS’) has broadened the existing exemption from the Total Debt Servicing Ratio (‘TDSR’) threshold of 60% for refinancing loans for owner-occupied residential properties which were bought before the introduction of the TDSR rules.

Friday, February 14, 2014

OIS Discounting Workshop, Singapore 24-25 March 2014

Ben Watson, a well-known and much sought-after subject-matter expert in the Asia-Pacific region, will be conducting a 2-day workshop on OIS Discounting.

Click here for more information and to book your place.

Friday, February 7, 2014

Licence Applications to Invest Offshore Renminbi in Chinese Securities Markets

Singapore was allocated an aggregate quota of RMB 50 billion under China’s RQFII programme.
Singapore financial institutions (‘FIs’) with a license as Renminbi Qualified Foreign Institutional Investor (‘RQFII’) will be able to offer Renminbi (‘RMB’) investment products to investors and to invest offshore RMB into China’s securities markets within their allocated quota.
Singapore-incorporated FIs which are approved by the Monetary Authority of Singapore (‘MAS’) to conduct fund management activities may submit their application for an RQFII licence through an approved custodian bank in China to the China Securities Regulatory Commission (‘CSRC’).

For more information see our regulatory update on the Licence Applications to Invest Offshore Renminbi in Chinese Securities Markets.

Monday, July 1, 2013

OIS Discounting in Asia

Check out the latest edition of Risk Asia. I have been quoted in this excellent article of the current state of OIS discounting at Asian and Australian banks. The key message is that OIS discounting is a fundamental change in the way banks price and view the risk associated with collateralised trades. It is a long and quite complex process and there are PnL opportunities for the early adopters as they can make choices that optimise the the type of collateral they posted. Those banks who wait will become price takers and miss the opportunities OIS discounting presents right now.

Tuesday, April 2, 2013

Random Walkers - Quants in a Pub - Thu 4th April

Singapore's only Quant Finance Social event will convene again this month on Thursday 4th April.

Join quants from banks, funds and academia to talk about all things quant or not and where the highest levels of liquidity can be found in a pint glass.

Date: Thursday 4th April 2013

Time: 6:30pm onwards

Place: The Bull and Bear, 33 Pekin Street, Singapore 048671
+65 6557 0879
www.bullandbear.com.sg

The event takes place on the first Thursday of every month at the Bull and Bear.