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MAS proposes margin requirements for 'uncleared' OTC derivatives

The Monetary Authority of Singapore building.

In a bid to make the trading of over-the-counter (OTC) derivatives safer, the Monetary Authority of Singapore (MAS) proposed on Thursday to impose margin requirements on nearly all OTC derivatives that are not cleared by a qualifying central counterparty.

The only exceptions will be physically settled foreign-exchange forwards and swaps, the MAS said in a press release.

Noting that margin requirements reduce counterparty risks and are part of broader global reforms to make the trading of OTC derivatives safer, the MAS added that it would carry out a quantitative study to evaluate the potential impact of its proposals.

It said it plans to implement the margin requirements in phases, starting with banks, which it said have the most exposure to such "uncleared" derivatives.

It invited interested parties to submit their comments by Nov 1. Details of the proposals can be found on its website.