The Monetary Authority of Singapore (MAS) intends to simplify rules to encourage more exchanges and also make it easier to launch new derivative products.
It proposes to improve market operators' business flexibility when establishing new centralised trading facilities and speed to market when launching new products.
The proposals, set out in a consultation paper yesterday, are part of MAS' broader objectives to facilitate innovation in financial services by recognising emerging new business models while safeguarding investors' interest.
There will be a new multi-tier regime for market operators or exchanges, said MAS.
The regulator proposes to expand the existing Recognised Market Operators (RMO) regime from a single tier to three separate tiers - RMO Tier 1, RMO Tier 2 and RMO Tier 3 - to better match regulatory requirements to the risks posed by different types of market operators.
"A multi-tier RMO regime with gradated requirements can better accommodate the emergence of new business models such as blockchain-based or peer-to-peer trading facilities, and lower the cost of entry for start-up operators," it said.
MAS currently regulates market operators under two categories, namely the Approved Exchanges (AEs) and RMOs. AEs include the Singapore Exchange (SGX) and ICE or Intercontinental Exchange, while RMOs include Cleartrade for trading commodity derivatives, or bond portals such as Bloomberg Tradebook and BGC.
Systemically important market operators such as the SGX are subject to a higher level of statutory obligations, while other non-retail market operators are regulated as RMOs.
At present, only AEs are allowed to serve retail investors.
RMO Tier 1 is a new tier for market operators that serve a limited base of retail investors, said MAS.
Currently, the RMO regime does not allow access to retail investors.
With this new tier, market operators that do not pose system-wide risks will be allowed to serve retail investors if they are able to meet additional requirements that pertain to retail investor protection, said MAS.
"These requirements are more stringent than the existing RMO regime and include increased information disclosure."
RMO Tier 2 is for market operators that qualify under the existing RMO regime. These exchanges do not pose system-wide risks, and serve only non-retail investors, it said.
The regulatory requirements for this tier will be unchanged and market operators that are currently authorised as RMOs will be reclassified under Tier 2.
RMO Tier 3 is a new tier for market operators with a significantly smaller scale of business compared to more established operators.
"This new tier is designed to facilitate new entrants that develop solutions for wholesale market participants, or market operators that have reached the end of their sandbox tenure and are commercially viable, but whose businesses are not able to meet the requirements of the existing RMO regime."
Under this tier, they will be subjected to less stringent requirements on capital, technology risk management and outsourcing, said MAS. Their scale of business activity will, however, be capped to limit the impact in the event of failures, it added.