Will Singapore Capitalize On Regulatory Arbitrage Opportunities?

Conventional wisdom, and some anecdotal evidence, suggested OTC markets would shift to Asia, and Singapore in particular.  In a recent Business Times article, Ravi Menon, the managing director of the Monetary Authority of Singapore (MAS), tried to put those claims to rest.

‘In recent months, there has been a notion in some quarters that as tighter regulations are proposed for OTC derivatives in the US and EU, activity will flow to centres in Asia that are purposefully less heavily regulated,’ Ravi Menon said during a regulation conference hosted by Thomson Reuters.

‘This is mistaken. Leading centres in Asia like Singapore, Hong Kong and Australia are very much part of the G-20 process and initiatives, and there is no room for regulatory arbitrage,’ he added.

However, Mr. Menon acknowledged that Singapore was still deliberating on the appropriate level of centralized clearing and emphasized the risks to an overly broad requirement.

‘Comprehensive implementation of centralized clearing is not without challenge, we need to determine carefully the products for mandatory central clearing, particularly those employed by commercial end users,’ he said.

‘The cost of clearing can potentially increase their hedging cost, cause a cut back in needed investment or an increase in unhedged positions.’

Mr. Menon’s comments still leave open the question . . . Will Singapore capitalize on regulatory arbitrage opportunities?

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