SINGAPORE – Australia and Singapore have this week signed an innovative memorandum of understanding (MOU) that will see the mutual exchange of trade repository data. The deal is the first of its kind, and is designed to mitigate any future trading risk and loss between the two countries.
The deal was struck by Australia’s Securities and Investments Commission (ASIC) and the Monetary Authority of Singapore (MAS). Trade repository data, or over-the-counter (OTC) derivatives, are financial instruments commonly used by businesses to help gauge financial risk. Unlike stock exchanges, they are not readily available for public scrutiny and their use must be agreed upon by willing parties.
Australia and Singapore claim that their agreement is unique in that an OTC has never before been agreed to by two national regulators. In signing their MOU, ASIC and MAS are effectively authorizing one another to analyze licensed trade repositories so as to allow for a greater level of mutual transparency.
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The deal is a further endorsement of the strong working relationship between Australia and Singapore, who have had enjoyed a bilateral free trade agreement (FTA) for more than ten years. In a joint statement, Ong Chong Tee, MAS’s Deputy Managing Director, said: “This MOU is an important framework for ensuring that both MAS and ASIC would have appropriate access to relevant data in their respective licensed trade repositories, whether such trade repositories are located in Singapore or Australia.”
G20 nations have long since identified greater transparency in OTC derivatives as an important factor for preventing another financial crisis. However, the ability of national regulators to enact such measures has been inherently undermined by stringent rules on banking confidentiality. Australia and Singapore have seemingly circumvented this problem, largely by offering assurances that the confidentiality of exchanged information will indeed be protected.
Ong Chong Tee hinted that the deal may precipitate change in how trade repository data is treated in Asia as a whole, saying that the agreement “reflects MAS’ strong support for the effective implementation of OTC derivatives trade reporting reforms in Singapore and other jurisdictions in the region, including Australia, as part of ongoing global efforts to enhance transparency and to reduce systemic risk in the OTC derivatives markets.”
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The deal rounds off a month of productive bilateral relations for Australia, and is further testament to the continent nation’s eagerness to form strong links with other nations in the Asia Pacific. In their joint statement, ASIC’s Chairman Greg Medcraft said: “ASIC is committed to ensuring these important reforms are implemented in a way that minimizes cost to Australian business and promotes the role of Australia as a financial center, by making use of international infrastructure where possible.”
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