Written reply to PQ on commodity trading

Questions

Mr Saktiandi Supaat: To ask the Minister for Trade and Industry (a) whether recent commodity trade blow-ups in Singapore will impact our reputation as a commodity trading hub; (b) whether there is a need to strengthen regulatory frameworks; and (c) how are financial irregularities kept at the minimum and adequately penalised to ensure Singapore remains a fair and safe hub to conduct trading.

Written Answer by Minister for Trade & Industry Mr Chan Chun Sing

1. Approximately 80 percent of the world’s largest entities in the energy, agriculture, and metals and mining sectors have made Singapore their home for international trading.  This makes Singapore one of the top three global trading hubs along with Geneva and London. Singapore is regarded as an attractive location by global trading companies due to our robust legal framework, open and competitive marketplace with a large pool of counterparties, and strong financial and shipping sectors.  

2. Members would be aware of the recent news of a few high-profile cases in the commodity trading sector.  While I am unable to comment on specific cases that are undergoing investigations, let me set out some principles that underpin our regulatory philosophy.  

3. First, trading companies, like all commercial entities, must abide by Singapore’s penal code and commercial laws.  Instances of fraud are punishable by a fine, imprisonment, or both.  

4. Second, like Geneva and London, we apply a risk-based regulatory regime.  For example, companies that deal with retail customers in commodity derivatives and spot commodities, are licenced and regulated under the Securities and Futures Act and Commodity Trading Act respectively.  Those that transact only in commodities derivatives and spot commodities on their own account, and do not solicit funds from members of the public, are currently exempt from licencing.  Such companies are subject to credit assessments by their lenders and counterparties, and market best practices.  Following the recent cases, Enterprise Singapore and the Monetary Authority of Singapore are reviewing the disclosure and lending practices in trading companies and their financing banks respectively, to consider if additional measures are needed to increase transparency and trust in the industry.  

5. Third, we review our regulatory regime regularly to continue to ensure that we are in line with global standards and ensure that we remain a fair and safe trading hub for all market participants.