A future exchange paves way for operations to be conducted in an organized market that list or permit the trading of future contracts. There are many obligations and responsibilities that are required for a futures exchange to fulfill with regards to the facilitation of futures contracts.

The maximum position that may be either net long or net short, as determined by an exchange and held or controlled by any party to the futures contract is referred to as position limit. An approved exchange is given the obligation to impose these position limits or position accountability thresholds in order to mitigate the occurrence of market manipulation.

A price limit is established to maintain the fluctuation of the prices of futures contracts, which when exceeded, leads to the placement of constraints with regards to the trading of futures contracts. These are often put in place to ascertain that the trading of futures contracts or classes of futures contracts are done in an orderly manner.

The conversion ratio is used to identify the number or value of the underlying things to which a warrant relates. The ratio stands in the place of “A” in the formula provided for call warrants, A × (B – C) = D and in the formula provided for put warrants, A × (C – B) = D.

The sharp price movement indicates the fluctuations in price between any two points in time. These fluctuations refer to the continuous movements of the prices upwards or downwards within the span of time found between T, or the time at which the comparison in the price of futures contract is determined and T-1, or the time at which calculations of the daily settlement price of the last trading day are made.

Relevant products are listed or permitted for trading on an exchange that operates in an organized market called a relevant products exchange. There are many obligations and responsibilities that are required for a relevant products exchange to fulfill with regards to the facilitation of relevant products.

By establishing appropriate price limits, a futures exchange may alleviate the risks of possibly having disorderly trading arising from sharp price movements for futures contracts. This endeavor is one of the requirements in relation to futures contracts.

A relevant product exchange must ascertain that prior to de-listing futures contracts that no open interest remains in the futures contract, no open interest in the futures contract is present at the point of de-listing, and that the de-I only
listing of the future contract does not act against any legal obligation the relevant product exchange is subject to. These are among the obligations imposed by the MAS in relation to the de-listing of futures contracts.

Seeking to effect changes to the specifications of a relevant product require the informing the MAS not later than 1 week prior to the release of a detailed announcement of the change or 1 week before the changes are made to take effect. In addition, they must ascertain that the relevant product remains in compliance with requirements of the Notice prior to enabling the changes to take effect.

An exchange determines a certain value with regards to futures contract or class of future contracts called the: position accountability threshold, which indicates whether or not a person is obligated to report the positions in the said future contracts. A position that exceeds the value set determined will be required to report. This serves as a regulatory control that helps minimize risks associated with the relevant products.

It is the obligation of a futures exchange to ascertain that the futures contracts that they list or permit for trading establish methodologies that address daily settlement prices that must reliably reflect the prevailing market conditions and must not be susceptible to manipulation

Relevant product exchanges are expected to conduct an assessment with regards to reputational, operational and legal risks that it encounters on a continuous basis and implement the necessary steps to appropriately and sufficiently reduce the occurrence of such risks.

An excluded warrant is a warrant with either any share/debenture of corporation, any unit in a business trust, any unit of a collective investment scheme that are listed on a specified exchange, or any securities indexes comprising shares or units of the other three. The Notice on Listing, De-listing, or Trading of Relevant Products does not apply to excluded warrants.

Under Paragraph 4.4, the notification requirements with regards to relevant products includes the submission of documents not surpassing a week before a detailed announcement is made to the public or not earlier than 12 weeks before the product’s listing. This detailed announcement indicates the detailed description of the product and the date that the exchange intends to list it. On the other hand, under paragraph 3.20, reforms must be communicated to the MAS prior to the release of a detailed announcement. The detailed announcement herein pertains to the relevant detailed description that exchange provides with regards to the changes, and the date of they take effect.

To provide basis for definition B of a warrant under this notice, A × (B – C) = D connotes the specified formula for a call warrant, whereby “A” is the conversion ratio in respect of the warrant, B is either the value given to the specified securities or units of the collective investment scheme at a specified time in the future or the securities index’s value at a specified future time and “C” is either the exercise price of the warrant or the given value of the securities index upon entering the warrant.

To provide basis for definition B of a warrant under this notice, A × (C – B) = D connotes the specified formula for a put warrant, whereby “A” is the conversion ratio in respect of the warrant, B is either the value given to the specified securities or units of the collective investment scheme at a specified time in the future or the securities index’s value at a specified future time and “C” is either the exercise price of the warrant or the given value of the securities index upon entering the warrant.

The authority may examine, the position limit’s or positions accountability threshold’s ability to materially reduce the occurrence of the accumulation of open interest in a futures contract, the likelihood of a futures contract to be able to influence the price of the futures contract, and the likelihood of one or more parties to a futures contract to influence the price or value of the underlying things of the futures contract, in order to determine the effectiveness of the limit and threshold in mitigating the possibilities of market manipulation. This task is in accordance with the requirements in relation to futures contracts.

A futures equivalent basis provides a foundation upon which a given option is adjusted using the risk factor or delta coefficient of the option. The said risk factor or delta factor must be calculated at the close of the last trading day that the option was traded on the exchange. The relevance of the futures equivalent basis lies in its ability to be used for the calculation of the position held in respect of an option on the futures contract.

A relevant product exchange must ascertain prior to de-listing relevant products that there remains no outstanding investor positions in the alternative product that is to be de-listed, that it has ensured that the de-listing of the alternative product will not cause any disruption to any other market and that the the alternative product is not in breach of any legal obligation applicable to the exchange. These are among the obligations imposed by the MAS in relation to the de-listing of relevant products

Prior to the listing or trading of a futures contract, a futures exchange is expected to notify the Authority, in the form they require, of the appropriate price limits, position limits, position accountability thresholds in accordance with the sections of this notice, and as well as of the ability to determine the fact that a person has surpassed the limits or thresholds in respect of the futures contract. This must be duly signed by the CEO, or any officer on behalf of the CEO that the authority deems qualified. The establishment of a framework catered towards comprehensively identifying and mitigating all risks to the alternative product is not included because it is a notification requirement prior to the listing of an alternative product, and not of a futures contract.

Prior to the listing or trading of alternative products, an exchange is expected to notify the Authority, in the form they require, of the established framework that is able to comprehensively identify and mitigate all risks with respect to the alternative product and that they encompass the ability to demonstrate the efficacy of the framework to the Authority on a continuous basis. This must be duly signed by the CEO, or any officer on behalf of the CEO that the authority deems qualified. The assurance that the products serve an economic purpose and the ascertainment of the ability to monitor significant events pertaining to the product are notification requirements with regards to the listing of relevant products.

An exchange is obliged to submit the necessary documents containing the requirements for notification not later than one week before a detailed announcement is released to the public or the members of the exchange and not earlier than twelve weeks prior to the listing of the product. In the absence of a detailed announcement, an exchange must fulfill the notification requirements through the submission of documents not surpassing a week prior to the listing of the relevant product but not earlier than twelve weeks before the product is listed.

A relevant exchange is obliged to certify to the authority, in the form and manner prescribed, that nothing concerning can be observed that may pose a threat to their compliance. This must be done in a document signed by their CEO, or any officer the authority deems qualified every 8th of October starting 2019 in case the relevant product’s listing date falls prior to the 8th of October 2018. If, however, the listing date falls on or after the 8th of October 2018, the relevant exchange must fulfill the requirement twelve monts from the date of listing and every twelve months thereafter.

Prior to the listing or trading of a relevant product, an exchange is expected to notify the Authority, in the form they require, that it has ascertained that the relevant products serve an economic purpose, that they have conducted an assessment of the reputational risks, legal risks and operational risks posed by the relevant product and have established the appropriate steps to mitigate the risks, and that they will continue to capacitated in terms of monitoring the significant events pertaining to the relevant product. This must be duly signed by the CEO, or any officer on behalf of the CEO that the authority deems qualified. The imposition of appropriate limits or position accountability thresholds is not included because it is a notification requirement prior to the listing of a futures contract, and not of a relevant product.

The purpose of establishing a position accountability threshold is to mitigate the risks of the occurrence of market manipulation. In case this threshold is surpassed, the exchange is required to make available information with regards to why such a large position is being held, how the holding of the position advances a person’s trading strategy, and how the position is being utilized for hedging, and the relevant contracts it is being hedged against.

An alternative product refers to any other relevant product governed by SAF CAP. 289 other than a futures contract or excluded warrant. Any exchange that conducts its operations on an organized market wherein alternative products are listed or permitted for trading is obliged to present to the Authority on a continuous basis the framework it has established for the purpose of comprehensively identifying and addressing all of the risks pertaining to each alternative product.

A relevant product refers to any instrument, contract or transaction on any organized market operated by the approved exchange. This, however, excludes securities, any unit in a collective investment scheme, a spot contract, a deposit as defined in section 4B of the Banking Act (Cap. 19), a deposit as defined in section 2 of the Finance Companies Act (Cap. 108), any contract of insurance in relation to any class of insurance business specified in section 2(1) of the Insurance Act (Cap. 142) or any contract or arrangement that is, or that belongs to a class of contracts or arrangements that is, prescribed not to be a derivatives contract from the definition.

A futures contract is a contract publicly listed on an organized exchange to buy or sell commodities, securities, or foreign currencies with a price set in the present but is to be settled in the future. This differs from a forward contract due to the fact that it is not a private contract, and the transaction may be entered through a broker instead of dealing with the counterparty directly.

A sharp price movement indicates steep fluctuations in the prices between two points in time. The risks associated with this may be mitigated through the setting of appropriate price limits.

In the case that a futures contract is allowed for physical delivery, it is required for delivery procedures to be instituted. This is to ascertain that the underlying things of the futures contract are delivered from the seller to the buyer of the futures contract in a safe, reliable, and timely manner.