SGX to hive off regulatory functions with new unit; MAS to continue to regulate SGX

SINGAPORE Exchange (SGX) announced on Monday it is separating its regulatory functions by establishing a subsidiary (RegCo) with a separate board to carry out these functions, in a move that the Monetary Authority of Singapore (MAS) said would strengthen SGX's role as a self-regulatory organisation (SRO).

Hiving off its regulatory functions will also help SGX manage potential conflict of interest between its commercial and regulatory roles.

RegCo is expected to be set up by the second half of next year.

The SGX counter rose in trading shortly after the announcement was made when a trading halt was lifted at 12.45pm. At 1.17pm, it was eight cents higher at S$7.82.

SGX had halted the trading of its shares on Monday just before the market opened, citing a news by The Straits Times which reported rumours that SGX may set up a separate unit to house its regulatory functions.

The new subsidiary will be governed by a board of directors separate from that of SGX's, while directors will also be independent of any other company listed on SGX. The chief regulatory officer of SGX, Tan Boon Gin, will head up RegCo and report directly to RegCo's board.

SGX said in a release that it will be directly accountable to MAS for ensuring the adequate provision of resources to RegCo in order for it to carry out its regulatory functions.

MAS will continue to directly regulate SGX in terms of its obligations as a listed company and market operator, as well as maintain oversight of SGX's regulatory responsibilities as performed by its regulatory subsidiary.

"The decision to house our entire regulation unit in a separate subsidiary with its own governance structure was made after a long and careful deliberation," said SGX chief Loh Boon Chye. "The new arrangement and the Oct 2015 introduction of the independent Listings Committees demonstrate our commitment to do all that we can within the self-regulatory organisation (SRO) framework to address potential conflicts between our commercial objectives and our regulatory responsibilities. This will further enhance the robustness of our SRO framwork."

MAS has been in close discussion with SGX on enhancing the governance of SGX's regulatory responsibilities, said MAS in a separate release.

MAS highlighted: "The independence of the subsidiary company from SGX will be an important factor for its success. MAS will therefore require the chairman of the subsidiary company and a majority of its directors to be independent of SGX and its regulated subsidiaries, and for all directors to be independent of any corporation listed on SGX."