MAS may require central clearing of OTC interest rate swaps, seeks feedback

SINGAPORE may require over-the-counter (OTC) interest rate swaps to be centrally cleared, according to a public consultation by the Monetary Authority of Singapore (MAS).

The proposal will affect only Singapore-dollar and US-dollar OTC contracts, which are the most widely traded interest rate derivatives in Singapore. And the requirement will initially apply only to banks that book more than S$20 billion of derivatives contracts on a gross notional outstanding basis.

The contracts may be cleared through domestic or foreign central counterparties, as long as they are regulated by MAS.

The move towards central clearing of OTC products follows from a regulatory change in 2012 that gave MAS the power to mandate reporting of OTC derivatives to trade repositories and to require the central clearing of OTC derivatives. The mandatory trade reporting regime was implemented in October 2013.

The consultation runs through July 31.