Subsidiary with separate board to perform SGX's regulatory functions

SINGAPORE Exchange (SGX) is separating its regulatory functions by establishing a subsidiary (RegCo) with a separate board to carry out the front-line regulatory functions that it currently performs.

"The move aims to further enhance the governance of SGX as a self-regulatory organisation by making more explicit the segregation of its regulatory functions from its commercial and operating activities, SGX said in a release to Singapore Exchange slightly after noon on Monday.

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

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.

"The establishment of RegCo will add to the safeguards in place to ensure high governance standards in the regulation and operation of SGX markets," SGX added.

Meanwhile, the Monetary Authority of Singapore (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 RegCo). SGX said in the 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.

"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."

SGX halted the trading of its shares on Monday just before the market opened, citing a news by The Straits Times which reported rumours that the SGX may set up a separate unit to house its regulatory functions. SGX requested for the trading halt to be lifted at 12.45pm.

In the past, SGX has come under fire for the perceived conflict of interest of being a profit-making entity which has to answer to shareholders as well as a market regulator.