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As part of its efforts to engage in dialogue with the MAS on this topic, AIMA formed a Singapore working group to consider and comment on the proposed reforms, below of which is a summary of the response submitted to the MAS. AIMA’s response made the following main points:

• AIMA broadly supports the proposed regime for the over-the-counter derivatives market in Singapore;

• The regime should include a bottom-up and top-down approach to determining which contracts are suitable for clearing, and all types of OTC derivative contracts could potentially fall within this scope;

• All counterparties to OTC derivatives should be subject to the clearing obligation, although a de minimis threshold should exist which takes account of the size of the total assets for both financial and non-financial entities;

• Market participants subject to the proposed clearing obligation should be able to fulfil that obligation with either a regulated Singapore established CCP or a comparable recognised foreign CCP;

• The MAS clearing obligation should apply to all suitable OTC derivatives booked by at least one Singapore based or regulated financial or non-financial entity. ‘Evasion’ of the clearing mandate should be narrowly defined to capture only those cases of purposeful avoidance of the specific obligation;

• All parties should be required to report full details, at the internationally agreed standard, of their derivative transactions, whether subject to the clearing mandate or not, without exception to either domestic trade repositories or recognised foreign trade repositories to which the MAS has access. Only one party should make such reports for both counterparties, under the proposed reporting protocol;

• A mandatory trading obligation for eligible derivative contracts should only be introduced when and if the effects on market liquidity are assessed and the industry is consulted further on such a proposal; and

• The MAS should ensure that the regime for the regulation of recognised clearing houses (RCH) and approved clearing houses (ACH) allows for the provision of client clearing and full segregation and portability of assets and positions of those clients

(press release)

As the global hedge fund association, the Alternative Investment Management Association (AIMA) has over 1,300 corporate members (with over 6,000 individual contacts) worldwide, based in over 40 countries. www.aima.org

BG