MAS Finalises Proposals to Enhance Capital Framework for Approved Exchanges and Approved Clearing Houses

On 27 March 2025, the Monetary Authority of Singapore (“MAS“) issued its “Response to Consultation on Proposed Amendments to the Capital Framework for Approved Exchanges and Approved Clearing Houses” (“Response“). The Response follows MAS’ previous “Consultation Paper on Proposed Amendments to the Capital Framework for Approved Exchanges and Approved Clearing Houses” (“Consultation“) from 4 December 2023 to 15 January 2024, which aimed to: (i) ensure that the capital framework for approved exchanges (“AEs“) and approved clearing houses (“ACHs“) remains fit for purpose, and to incorporate international practices that have evolved over time; and (ii) extend the proposed capital framework to other capital market financial market infrastructures (“FMIs“) including Licensed Trade Repositories (“LTRs“), with appropriate adjustments.

Following from the Response:

1. New Notice and amended Regulations: MAS will issue a notice for the revised capital framework (“Notice“) and set out consequential amendments under: (i) the Securities and Futures (Organised Markets) Regulations 2018; (ii) the Securities and Futures (Clearing Facilities) Regulations 2013; and (iii) the Securities and Futures (Trade Repositories) Regulations 2013, for AEs, ACHs, and LTRs respectively (collectively, the “Regulations“). See Annex A and Annex B of the Consultation for drafts of the Notice and the amended Regulations, respectively.

2. Transition periods (baseline and extended): MAS will update capital market FMIs when the finalised Notice and amended Regulations have been issued and provide a three-month transition period from such issuance to comply with the revised capital requirements. Entities that require more time to comply can seek approval for an extended transition period of up to 12 months.

The key points from the Response are summarised below. 

1. Separate liquidity requirement: MAS will proceed with its proposal to introduce a liquidity requirement that is separate from the solvency requirement, to address the different purposes of each requirement. The proposed liquidity requirement would require an AE or ACH to hold cash or near cash assets sufficient to cover:

• • at least six months of its annual operating expenses (calculated based on audited figures in the latest financial statement or annual report). This standard is a minimum that capital market FMIs are required to maintain at all times, and they are generally expected to exceed this minimum. In complying with this requirement, capital market FMIS will be expected to take into account potential changes to the general business environment; or
  • an amount as assessed by the AE or ACH that is needed to achieve recovery or an orderly wind-down, whichever is higher.

2. Capital components for eligible capital: MAS will proceed with the following proposed changes to the capital components in determining eligible capital:

• • Proposed exclusions:The calculation of eligible capital will exclude the following from the capital components: (i) redeemable or cumulative preference share capital in excess of 100% of the AE or ACH’s base capital; (ii) collective impairment allowance; and (iii) qualifying subordinated loans.
  • Proposed deductions:The following deductions from the capital components will be incorporated: (i) pre-paid expenses; (ii) unsecured loans and advances extended by the AE or ACH; and (iii) for an ACH, cash committed as skin-in-the-game to absorb losses arising from custody and investment losses.
  • Proposed removal of current deduction:The current requirement to deduct non-current and illiquid assets from the capital components will be removed. MAS will manage the provision of liquid assets separately from the solvency requirement, through the introduction of the separate liquidity requirement.  

3. Calculation of components for Total Risk Requirement (“TRR”):

4. Submissions and notifications: In the Consultation, MAS sought feedback on its proposal to set out the following requirements to submit to and notify MAS on matters relating to an AE or ACH’s capital in the Regulations (they are currently set out in approval conditions):

• • quarterly submissions reporting on the AE or ACH’s compliance with its liquidity and solvency requirements, within 30 days after the end of each quarter (60 days in the case of the last quarter);
  • yearly submissions on the AE or ACH’s capital plan, within 30 days after the start of each financial year; and
  • notifications within 21 days before the AE or ACH enters into any loan arrangements including issuing any debt instruments.

In the Response, MAS confirmed that:

• • MAS will shorten the minimum notification period to 14 days and may provide for a shorter notification period where appropriate.
  • The requirement to notify MAS before entering any loan arrangements excludes credit facilities entered into for day-to-day liquidity purposes. Capital market FMIs should inform MAS as soon as possible if they are entering into any time-sensitive loan arrangements.
  • MAS does not intend to make public the regulatory capital submissions made by capital market FMIs.

The Monetary Authority of Singapore (“MAS“) has issued a Consultation Paper seeking feedback on its proposed regulatory framework to allow retail investors to access private market investment (“PMI“) funds through authorised long-term investment funds (“LIFs“) with appropriate safeguards (“LIF Framework“). The LIF framework aims to align with the ongoing Equity Market Review by offering retail investors more investment options and potentially enabling private market funds to list on the exchange. Consistent with the global trend towards retailisation of private fund products, there is growing interest from Singapore retail investors in PMI funds. Presently, the regulatory requirements do not allow for the authorisation of a collective investment scheme (“scheme” or “fund“) that are PMIs.

The LIF Framework envisages two possible structures:

• A fund structure that makes direct PMIs (“Direct Fund“). Investors will have greater visibility of the fund’s underlying PMI assets, and be able to assess and choose the PMI manager that they wish to invest with.
• A long-term investment fund-of-funds (“LIFF“) structure that primarily invests in PMI funds. It will benefit investors who may wish to tap on the LIFF manager’s expertise in selecting and monitoring a LIFF’s underlying portfolio of PMI funds.