2B.2 Licensing and business operations
The derivatives-specific licensing and operational rules. They parallel RES 1B; the differences are the base-capital table and the derivatives account, risk-disclosure and register-of-interests requirements.
2.1 Licensing
Section titled “2.1 Licensing”Corporations dealing in derivatives as principal or agent require the appropriate CMS licence unless exempt. A variation is required to add a regulated activity or additional product.
2.2 Base capital
Section titled “2.2 Base capital”| Activity/entity | BCR |
|---|---|
| Exchange-traded derivatives: clearing member | S$5m |
| Exchange-traded derivatives: trading member or non-member | S$1m |
| Exchange-traded derivatives: introducing broker | S$500k |
| Exchange-traded derivatives: other | S$50k |
| OTC derivatives: clearing member | S$5m |
| OTC derivatives: non-clearing member with retail clients | S$5m |
| OTC derivatives: non-clearing member with only non-retail clients | S$1m |
| OTC derivatives: other | S$500k |
| Specified commodity futures: clearing member | S$1m |
| Specified commodity futures: non-clearing member/non-member | S$500k |
| Specified commodity futures: introducing/restricted broker | S$250k |
| Leveraged FX: retail clients | S$5m |
| Leveraged FX: AI/II/EI clients | S$1m |
The application, management, notification, lapse, approval and duty requirements parallel RES 1B, but derivatives firms must also account for exchange/clearing-house membership and product-specific controls.
2.3 Representatives
Section titled “2.3 Representatives”Representatives need notification/registration and may act for one principal unless permitted otherwise. Competency, education, relevant experience, CMFAS, fit-and-proper, identity, work-authorisation, past-record, bankruptcy and credit checks apply. RNF status, public register, RNF number, cessation, the seven-day individual notification and 14-day principal notification, and continuing education apply as for RES 1B.
2.4 Advertising
Section titled “2.4 Advertising”Product advertisements must be truthful, fair, balanced, clear, legible, properly approved and carry the MAS non-review statement. Non-product advertisements must not mislead, falsely promise free services or exploit inexperience.
2.5 Confidentiality
Section titled “2.5 Confidentiality”Customer order information may be disclosed only where needed for execution, permitted by market/clearing rules, or required by MAS. Banking secrecy, PDPA, DNC checks and clear consent apply.
2.6 Opening and management of derivatives accounts
Section titled “2.6 Opening and management of derivatives accounts”Before opening a derivatives account, provide a separate Form 13 risk-disclosure document and obtain the customer’s signed and dated acknowledgement that he received and understood it. Monthly statements show derivatives/spot-FX positions, establishment prices, marked-to-market unrealised P&L, custody assets, asset movements, customer money movements and charges/credits. Exceptions: clearing-house information, no account change, and eligible non-retail real-time statements or written non-receipt. A quarterly statement is required if the last month of the quarter had no monthly statement.
Issue contract notes by the next business day, identifying the firm, customer, date, derivatives type/quantity, price, consideration, adjustments, commission and taxes, and principal/dealing-against-customer status. For OTC derivatives, a transaction confirmation may replace the contract note if it states holder, counterparty, principal status, date, type and notional value.
2.7 Books and audit trails
Section titled “2.7 Books and audit trails”Keep English books and records for at least five years, including customer/guarantor/authorised-trader information, money/assets, powers of attorney, agreements, Form 13/Form 14 acknowledgements, OTC account documents, orders, advertisements, communications, confirmations, proprietary trades, income/expenses, assets/liabilities and all OTC transactions. Audit, five-month filing, immediate auditor reporting, and the prohibition on destroying/concealing/altering books apply.
2.8 Customer money/assets and fiduciary controls
Section titled “2.8 Customer money/assets and fiduciary controls”Treat customer money/assets as belonging to customers and segregate them. Trust/custody accounts must be held with permitted institutions/custodians; conduct due diligence, obtain acknowledgements, disclose commingling/insolvency/foreign-law risks and ensure interest/returns accrue to customers. Investment of customer money is limited to permitted government securities/debt instruments with records. The firm may advance its own funds only to prevent underfunding/undermargin or maintain the account, and may retain returns on that advance.
Customer agreements and custody agreements must describe authority, liens, collateral realisation, commingling, registration, entitlements, information, liability and fees. Withdrawals are limited to customer/entitled payments, proper charges, customer directions, customer obligations, clearing/investment purposes, lending, lawful collateralisation or law. Customer assets may be mortgaged only up to the debt, with retail disclosure, risk explanation and written consent. Compute trust/custody account balances and required customer amounts at least daily, before noon each business day, and retain supporting data for five years. Do not transfer retail customer money title except for compliant specified-product lending.
2.9 Register of interests in listed specified products
Section titled “2.9 Register of interests in listed specified products”CMS holders and representatives must record interests in listed specified products within seven days of acquisition, retain the entry at least five years, keep a copy in Singapore and provide it to MAS on request.
Exam cues
Section titled “Exam cues”- BCR: leveraged FX and OTC derivatives with retail clients sit at the S$5m tier; derivatives clearing members are S$5m; specified commodity futures are lower. Where more than one applies, take the highest.
- Form 13: separate derivatives risk-disclosure document with a signed and dated acknowledgement before the account opens. Form 14 covers the overseas-listed product warning.
- Register of interests: listed specified products, within 7 days, retained 5 years, copy in Singapore.
- Daily control: compute trust/custody balances at least daily, before noon each business day.
- Trap: a transaction confirmation may replace a contract note for OTC derivatives only, and only if it carries the stated content.