The Monetary Authority of Singapore (MAS) has issued a consultation paper on proposed enhancements to the regulatory requirements for unlisted margined derivatives, which seeks to give better protection to retail investors.

Date: Jun 1, 2012

Tags: Singapore, Regulation, Suitability, Derivatives

The Monetary Authority of Singapore (MAS) has issued a consultation paper on proposed enhancements to the regulatory requirements for unlisted margined derivatives, which seeks to give better protection to retail investors.

The proposals aim to address the specific risks posed by unlisted margined derivatives such as contracts for differences (CFDs) and leveraged FX products (LFX), which are currently available to retail investors. 

According to a statement, retail investors who trade in CFDs and LFX are exposed to considerable risks, given the leveraging effect of margin trading on potential losses. Investors are also exposed to the creditworthiness and operational risks of the derivative product dealer.

In the event of a default, they may not have recourse to transfer their positions or recover their money in their trading accounts.

The proposed measures aim to:  

• Enhance credit risk management by derivative product dealers and mitigate the risk of over-leveraging by retail investors
• Ensure derivative dealers are adequately capitalised and financially sound in the operation of their business
• Enhance the protection and recovery of retail investors’ money and assets in the event of insolvency of the dealer
• Enhance risk disclosure to retail investors to better highlight the specific risks associated with trading unlisted margined derivatives so as to help them make informed decisions on the suitability of such products

More details: http://www.mas.gov.sg/news_room/press_releases/2012/
MAS_Reviews_Regulatory_Requirements_for_Unlisted_Margined_Derivatives_Offered_to_Retail_Investors.html