1B.1 The capital markets industry in Singapore and participants

Who and what makes up the Singapore market: the primary and secondary markets, the institutions that intermediate and regulate them, and the listing framework. The examination tests roles, powers and thresholds — which body may do what, and which applicant fits which listing route.

1.1 Introduction

1.1.1 The primary market

The primary market is where issuers raise new capital — equity shares, bonds and other fixed-income securities, and company warrants. Investors supply capital and accept that the instrument’s value will move with the issuer’s performance, market conditions and risk perception.

1.1.2 The secondary market

The secondary market is where those instruments change hands after issue. It lets investors realise profits, exit poor investments, transfer risk and rebalance. Derivatives — futures, options, warrants, leverage certificates — transfer or manage risk without buying or selling the underlying.

1.1.3 Exchanges and OTC markets

An OTC market is decentralised: participants contact one another to discover interest and negotiate. An exchange centralises buy and sell interest, improving price and quantity discovery. A person trades on an exchange either as a Trading Member or as a customer of one.

1.1.4 Financial intermediaries

Primary-market issues are complex and normally involve an issue manager or corporate-finance adviser, often a bank or CMS licence holder, who runs due diligence, structuring, documentation, regulatory submissions and investor communication. In the secondary market, brokers match or route orders; custodians safeguard client assets and support settlement.

1.2 Institutional participants in capital markets

1.2.1 Banks

• Qualifying Full Banks and Full Banks: full range of approved banking business; accept deposits in any amount and currency; provide capital-market, custody, underwriting and corporate-finance services.
• Wholesale Banks: accept foreign-currency deposits in any amount, but Singapore-dollar deposit-taking is restricted. They may take SGD fixed deposits of at least S$250,000. SGD savings/current accounts for Singapore-resident natural persons are generally non-interest-bearing unless MAS approves otherwise.
• Merchant Banks: licensed under section 55S of the Banking Act; cannot accept SGD deposits from, or borrow SGD from, the public except within permitted categories (banks, finance companies, shareholders and shareholder-controlled companies).

1.2.2 CMS licence holders

CMS licence holders conduct regulated activities such as dealing in capital markets products, advising on corporate finance and providing custodial services, as principal or agent. Product financing (credit for purchases) and specified-product lending (lending securities/products under the rules) are different activities and must not be confused.

1.2.3 Finance companies

Finance companies operate under the Finance Companies Act and may be exempt institutions for specified CMS licensing purposes, subject to their legal and regulatory conditions.

1.2.4 Remote overseas trading and clearing members

An overseas-based remote member is exempt from a Singapore CMS licence if it: is incorporated outside Singapore; is a member of the relevant approved exchange/clearing house or recognised market operator/clearing house; does not serve Singapore residents; is not a Singapore-regulated financial institution; is regulated at home; and its home regulator has a suitable MAS information-sharing arrangement. A remote clearing member additionally cannot have a MAS-regulated financial-institution affiliate; a remote trading member has no such restriction.

1.3 Regulatory framework and regulatory bodies

Singapore’s framework aims at acceptable risk and financial-system stability, safe and efficient infrastructure, fair/orderly/transparent markets, and informed customers.

1.3.1 Monetary Authority of Singapore (MAS)

MAS is Singapore’s central bank and integrated financial supervisor. Its functions include monetary policy, currency issuance, payment-system oversight, acting as banker and financial agent to the Government, supervision and financial-stability surveillance, managing official reserves and developing Singapore as an international financial centre.

MAS administers the SFA, SFR(LCB), Organised Markets Regulations, Clearing Facilities Regulations, Financial and Margin Requirements Regulations, Corporate Governance Regulations and the Financial Services and Markets Act 2022. Its powers include approving exchanges and clearing houses, reviewing rule amendments, inspecting books, investigating breaches and imposing warnings, fines, reprimands, suspensions, licence revocations and prohibition orders.

1.3.2 Singapore Exchange Limited (SGX)

SGX is an integrated multi-asset market infrastructure providing listing, trading, clearing, settlement, depository and market-data services. Its regulatory approach is guided by: (1) disclosure-based regulation; (2) comprehensive risk management; (3) risk-based targeting; (4) balanced international best practice; (5) transparency; and (6) SGX as frontline regulator while managing regulatory conflict under MAS oversight.

1.3.3 SGX-ST

SGX Securities Trading is the approved securities exchange; it manages day-to-day securities-market regulation, membership, trading requirements and discipline. Mainboard is for established issuers and has quantitative entry requirements. Catalist is for smaller or fast-growing issuers, uses a sponsor-supervised model and has no minimum quantitative entry test. The SGX-ST Listing Manual governs listing, acquisitions, realisations, takeovers and timely disclosure.

1.3.4 CDP

The Central Depository provides integrated clearing, settlement and depository facilities for equities, fixed income and funds. It holds book-entry securities as bare trustee, immobilises securities and uses a nominated custodian for physical certificates. SGX trades settle on T+2; a 2021 intraday settlement run allows earlier settlement and reduces counterparty risk. Direct CDP account holders should link their trading accounts.

• Pre-Settlement Matching Service: automates the matching of settlement instructions, reducing manual error and settlement failure.
• Settlement: delivery versus payment (DVP) settles payment against delivery through CDP; free of payment (FOP) settles cash outside CDP. The CDP Clearing, Depository and Settlement Rules apply.

1.3.5 SGX-DT

SGX Derivatives Trading (est. 1978) operates a futures market for commodity and financial underlyings — interest rates, equity and equity indices, and energy. Its Futures Trading Rules govern members and trading/settlement conduct.

1.3.6 SGX-DC

SGX Derivatives Clearing clears products traded on SGX-DT and OTC commodity and financial derivatives registered through the SGX Titan OTC platform. It is a Qualifying Central Counterparty, which can reduce Basel III capital costs for members and banking-group participants. The SGX-DC Clearing Rules govern clearing members.

1.3.7 SGX RegCo

SGX RegCo, an independent regulatory subsidiary created in 2017, has its own board and separates frontline regulatory functions from SGX’s commercial and operating activities.

1.4 SGX listing framework

1.4.1 Listing process

An issuer appoints a CMS corporate-finance issue manager or adviser plus professional advisers (lawyers, accountants). The process: preparation and due diligence; submission of listing documents; SGX-ST review, with MAS/SGX prospectus review where a prospectus is involved; public exposure; registration; launch; allocation; and commencement of trading.

1.4.2 IPO timeline

• Mainboard: Section A review commonly about four to six weeks; then Section B/prospectus review, any research blackout, public exposure on MAS OPERA for at least seven calendar days, registration/launch and listing.
• Catalist: the sponsor submits a pre-admission notification; SGX-ST reviews it (indicative two to four weeks); the listing application and offer document are lodged; the offer document is exposed for public comment (indicative two weeks); registration/launch (indicative one to two weeks); trading commences.

1.4.3 Listing methods and GDRs

• Primary listing: the issuer meets the initial listing requirements and, after listing, the continuing obligations.
• Secondary listing: an issuer already listed on an acceptable home exchange may list on SGX-ST Mainboard, generally continuing to comply with its home exchange and home-jurisdiction law while making simultaneous disclosures to SGX-ST.
• Global Depositary Receipts (GDRs): may be listed on Mainboard by an overseas-listed company; specialist products for institutional and accredited investors. Information released to the home exchange must also be provided to SGX-ST in English.

1.4.4 IPO or introduction

An IPO offers new and/or existing shares to the public under a prospectus lodged with MAS. An introduction involves no public share offer and suits an issuer that needs no capital at listing; an introductory document is submitted to SGX-ST and is not exposed for public comment like a prospectus.

1.4.5 Mainboard admission requirements

An IPO applicant generally satisfies one of three quantitative tests:

1. at least S$30 million consolidated pre-tax profit for the latest financial year and at least three years’ operating track record;
2. profit in the latest financial year, market capitalisation of at least S$150 million and at least three years’ operating track record; or
3. operating revenue in the latest completed financial year and market capitalisation of at least S$300 million (REITs and business trusts without historical financials may use this route if they can demonstrate immediate operating revenue).

The applicant should be financially healthy, with positive operating cash flow considered; debts owed to the group by directors, substantial shareholders and controlled companies should be settled before listing. Mining, oil and gas issuers have special market-capitalisation, reserves, working-capital, independent-qualified-person and independent-director requirements. Shareholder-spread, independent-director, promoter-moratorium, prospectus, accounting-standard, domicile, currency and continuing-obligation requirements also apply — including 25% public shareholding and at least 500 shareholders for issuers below S$300 million market capitalisation, at least two independent directors, Singapore-resident independent directors for foreign issuers, and promoter moratoria tied to the profit or market-capitalisation test.

1.4.6 Catalist listing

Catalist permits only a primary listing and requires an SGX-authorised full sponsor. There is no minimum quantitative entry test; the sponsor decides suitability, and SGX-ST may impose conditions, delay or refuse admission. A continuing sponsor must be retained throughout the listing.

Key criteria: 15% of post-invitation share capital in public hands, at least 200 shareholders, at least two independent directors, and at least one Singapore-resident independent director for a foreign issuer. Mining, oil and gas applicants must substantiate resources and maintain sufficient working capital. Offer documents are lodged on Catalodge, follow prospectus-style disclosure including SFA liability provisions, and are exposed for at least 14 days.

Mainboard vs Catalist: Mainboard is for established companies, is exchange-regulated and has quantitative admission tests; Catalist is for fast-growing companies, is sponsor-supervised and has no quantitative admission test.

1.4.7 Continuing obligations

Mainboard and Catalist issuers have broadly similar continuing obligations: material disclosure, periodic reporting, additional share issues, corporate transactions, corporate governance, interested-person transactions and free-float requirements.

1.4.8 Sponsors

Sponsors must remain eligible, seek SGX advice on issues affecting market integrity, maintain adequate systems and registered professionals, act independently and professionally, maintain regular contact, use qualified specialists where necessary and avoid conflicts. SGX reviews sponsor due diligence, continuing activities and breaches, and may reprimand, require education or rectification, impose conditions, or suspend sponsors and registered professionals.

1.4.9 Listed and quoted

“Listed” means appearing on SGX-ST’s official list. “Quoted” may mean trading on an OTC quotation platform without being listed and without the full listing/continuing-obligation framework.

1.4.10 Disclosure and SGXNet

Listed issuers must disclose material information via SGXNet, including information about subsidiaries and associated companies where needed to avoid a false market or inform investment decisions.

1.4.11 Meetings and voting

Shareholders receive meeting notices — normally 14 days for ordinary resolutions and 21 days for special resolutions — and may attend or appoint proxies; resolutions are voted by poll.

1.4.12 Enforcement

SGX may warn, fine by composition, require education or independent reviews, require remediation, suspend an issue manager or trading, or remove an issuer from the official list.

1.4.13 Debt securities

SGX-ST may list fixed- and floating-rate bonds, convertible/exchangeable and covered bonds, asset-backed securities, loan participation notes and hybrid capital securities. Issuer, trustee/trust-deed, offering-document, fee and continuing-obligation requirements apply.

1.4.14 SPACs

The SPAC framework introduced a listing vehicle that raises IPO capital to acquire an operating business or assets through a merger, share exchange or similar combination. At IPO a SPAC has no operating history or revenue-generating business, so information about the target develops when a proposed business combination is announced.

Exam cues

• Mainboard vs Catalist: S$30m profit / S$150m or S$300m market cap with 500 shareholders vs no quantitative test, 200 shareholders and sponsor supervision. Catalist is primary listing only.
• Numbers that decide questions: T+2 settlement; 25% public float (Mainboard below S$300m) and 15% (Catalist); 14 days ordinary and 21 days special meeting notice; OPERA exposure of at least 7 days (Mainboard) and 14 days (Catalist).
• Primary vs secondary listing: a secondary listing continues to comply with its home exchange.
• GDRs: Mainboard only; institutional and accredited investors; English disclosure to SGX-ST.
• IPO vs introduction: an introduction raises no public capital and has no prospectus exposure.

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