Singapore Exchange (SGX) is inviting public comment on two proposals to enhance its enforcement framework for the derivatives market. The proposals will allow the Exchange to provide a wider range of measures to deal effectively with rule violations under the Futures Trading Rules and Derivatives Clearing Rules.
The proposals seek to introduce:
(i) A "Composition Fines" system to facilitate prompt and effective resolution of rule violations that are of minor to moderate severity; and
(ii) Minimum penalties for egregious and serious rule violations. The penalties will be imposed by the Disciplinary Committee and underscore the severity of such rule violations.
These proposals will apply only to derivatives Member firms, Approved Traders and Registered Representatives. This is part of the Exchange’s ongoing efforts to enhance the transparency and efficacy of its enforcement actions.
(i) Composition Fines
The "Composition Fines" system provides an alternative for an offender to resolve a rule violation without going through the process of Disciplinary Committee hearings. In addition to the payment of a fine, the alleged party will also have to fulfill any accompanying terms to settle the matter.
SGX has classified rule violations into two categories, namely, "Compoundable" and "Non-Compoundable" violations1. New schedules, which set out the guidelines on the range of composition sums for compoundable rule violations, will be published and available in the Futures Trading and Derivatives Clearing Rulebooks.
The Exchange proposes to channel the monies collected from composition to fund educational initiatives for market participants.
(ii) Minimum Penalties
SGX will continue to present more serious and non-compoundable rule violations before the Disciplinary Committees for disciplinary action. To underscore the severity of such rule violations, SGX proposes to introduce "Minimum Penalties" that the Disciplinary Committee will impose on each case after the charges have been established.
The general minimum penalty for all non-compoundable violations will begin at S$10,000. A higher minimum penalty may be imposed to reflect the severity of the rule violation. SGX retains the discretion to refer cases that are classified as "compoundable" to the Disciplinary Committee. No minimum penalty will be imposed upon establishment of such charge(s).
1 "Compoundable violations" refer to rule violations which are of minor to moderate severity. "Non-compoundable violations" refer to rule violations which are more egregious/serious in nature.
Market participants and members of the public are encouraged to participate in this public consultation. The consultation paper which sets out the proposed amendments to the Futures Trading Rules and DC Clearing Rules will be available on our website, http://www.sgx.com/, from 19th of December 2007 to 9th of January 2008.