Licensing exemption for market operators
MAS may exempt certain corporations from the need to hold a licence as an AE or RMO. These market operators are known as Exempt Market Operators (EMO).
Exempt market operators
Pursuant to sections 14(1) and (2) of the SFA, MAS may approve an application to be an EMO from, or exempt, a corporation which wishes to establish or operate a market if, in the opinion of MAS, the regulatory objectives of MAS can be achieved without regulating that corporation as an approved exchange or a RMO. The scope of activities that an EMO can undertake is narrow. Possible scenarios whereby a market operator may be exempted include the following:
(a) where the market operator is already separately regulated by MAS. For instance, if the holder of a capital market services licence operates a market, MAS may choose not to regulate the market operator as an approved exchange or RMO, but instead impose appropriate conditions under the exemption; or
(b) where the market poses little risk to the regulatory objectives of MAS and its failure would cause little or limited impact to the financial sector in general. As such, the costs of regulation may outweigh the benefits of regulating the market
An example of the EMO arrangement is detailed below:
Description of the arrangement:
A corporation provides an electronic facility for the distribution of syndicated loans and loan equivalents in both primary and secondary markets. Users of the facility are restricted to institutional investors. Though several products are traded on the market, only one of the products, floating-rate notes (“FRNs”), falls within the definition of “securities” under the SFA. The volumes of FRN trades are small relative to the total volume of FRNs traded in Singapore and to the business of the corporation. There are several other options available to institutional investors wishing to trade FRNs.
The corporation providing the facility can seek to be an EMO under the SFA as the trading volume is low and their services are only offered to institutional clients. The failure of such a market is likely to have little or limited impact on the participants and the financial markets as there are other avenues to trade FRNs.