SINGAPORE Law and Practice Contributed by: Kenneth Pereire and Lin YingXin, KGP Legal LLC
7.2 Requirement to Be Licensed or Otherwise Register as Market Makers When Functioning in a Principal Capacity When a firm acts in a principal capacity, it may apply to The Singapore Exchange Securities Trading Limited (SGX-ST) in order to become a Designated Market-Maker. 7.3 Regulatory Distinction Between Funds and Dealers In Singapore, the MAS establishes regulatory distinctions between funds and dealers engaged in high-frequency trading and algorithmic trad - ing. Funds are primarily regulated under the SFA and FAA, focusing on investor protection and disclosure. Licensing requirements may neces - sitate funds to apply for a CMS licence for fund management. These funds operate within a broader investment context, aiming to generate returns for investors through optimised trading decisions. Firms that operate as dealers function as market makers, providing bid and ask quote on securi - ties, and profit from their spread. Dealers partici - pating in high-frequency trading and algorithmic trading are also regulated under the SFA and may require a CMS licence, emphasising market integrity and fair-trading practices. Both entities must adhere to MAS regulations, ensuring compliance with risk management, reporting and supervisory requirements. While there are regulatory similarities, funds and deal - ers have distinct roles and objectives within Sin - gapore’s financial framework. 7.4 Regulation of Programmers and Programming Programmers and software developers of trad - ing algorithms are highly recommended to apply the MAS Technology Risk Management Guide -
lines’ secure coding and application security standards during the development and creation of trading algorithms and other electronic trad - ing tools. These standards emphasise practices such as: • secure programming;
• cryptography; • authentication; • input validation; • output encoding; and • access controls.
While these guidelines are primarily applicable to financial institutions regulated by MAS, and not directly to the programmers and developers, they are essential in ensuring that the technology used by financial institutions complies with regu - latory expectations. The guidelines help mitigate the risks of security breaches, which could affect market integrity, customer data protection and overall financial stability. Additionally, the development and deployment of trading algorithms are indirectly regulated under the broader legal framework govern - ing financial activities in Singapore. The SFA, along with MAS regulations on high-frequency and algorithmic trading, require that firms using these algorithms implement robust risk controls and monitoring systems. As a result, while pro - grammers themselves are not directly regulated, the algorithms and tools they create must meet strict operational, legal and security standards, which are enforced by MAS on the firms deploy - ing these technologies. Therefore, programmers play a crucial role in ensuring that their algorithms adhere to these risk management, compliance and security standards to help financial institutions meet
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