SGX RegCo Proposes Streamlining ETF Market-Maker Rules to Align with Global Standards
The local bourse operator in Singapore announced on September 5 that its regulatory arm, Singapore Exchange Regulation (SGX RegCo), plans to streamline the requirements for designated market-makers (DMMs) of exchange-traded funds (ETF), aiming to align the regulatory framework with established global market standards.
SGX RegCo’s primary proposal involves removing the administrative requirement for market-makers to issue notifications and public announcements when they suspend or resume quoting prices for an ETF.
This change is intended to reduce administrative burden and improve the efficiency of the trading mechanism.
The regulatory body explained that this initiative is the direct result of a comprehensive review of the existing regulatory framework governing the listing and trading of ETFs.
The objective of the review was to pinpoint specific areas that might be hindering or impacting the attractiveness and functionality of the Singapore ETF market.
Market-makers are a crucial component of the liquidity structure, as they commit to providing continuous bid and offer prices, thereby ensuring smooth trading and tight spreads.
SGX emphasized this by stating, “ETF DMMs provide bid and offer prices during more than 95 per cent of the stock market hours each business day,” highlighting their essential role in the continuous trading environment.
This proposed change follows several previous measures implemented by the city-state in February to enhance its overall equities market, including the introduction of a 20 per cent tax rebate specifically for companies seeking primary listings on the Singapore Exchange.
These combined efforts reflect a strategic push to boost market liquidity and attract greater capital flow into the Singapore financial hub.
Broader Market Enhancements Amid Regulatory Review
The decision to streamline the regulatory rules for ETF designated market-makers is part of a broader, concerted push to enhance Singapore’s equities market functionality, even as the local financial sector undergoes an ongoing, high-level regulatory review.
The proposal to ease the administrative load on market-makers coincides strategically with an ongoing probe into the local stock market being conducted by the Monetary Authority of Singapore (MAS).
This wider review, initiated by a specialized group set up in August 2024, is specifically aimed at strengthening market functionality and integrity across the board.
The measures targeting ETF DMMs, therefore, fit into this larger context of improving the market’s operational efficiency and aligning its structures with international best practices.
Making the ETF trading environment more flexible for market-makers is expected to encourage greater participation and competition, which ultimately benefits retail and institutional investors through enhanced liquidity and reduced trading costs.
The smooth operation of ETFs, which track indices or baskets of assets, is highly dependent on the efficiency of market-makers, who step in to ensure that the ETF price remains closely aligned with the net asset value of its underlying holdings.
By removing unnecessary friction, SGX RegCo is looking to solidify the market’s appeal to issuers and investors globally.
The Singapore Exchange remains committed to an open and consultative approach, with the regulatory body currently seeking market feedback on the proposed changes.
The consultation period is scheduled to remain open until September 26, ensuring that all market participants have an opportunity to voice their perspectives on the regulatory evolution.
Strategic Importance of the ETF Market for SGX
The strategic move to improve the ETF regulatory framework underscores the increasing importance of exchange-traded funds as a vital investment vehicle and reflects SGX’s commitment to making the Singapore market a leading regional hub for passive investment products.
ETFs have experienced explosive growth globally due to their low-cost nature, ease of trading, and diversification benefits, making them popular with both individual and large institutional investors.
For a major financial center like Singapore, a robust and highly liquid ETF market is essential for attracting international fund listings and asset management mandates.
The regulatory streamlining, by focusing on operational efficiency for DMMs, directly addresses a potential friction point that could deter market-making firms from committing capital to the local ETF ecosystem.
The ability of DMMs to quickly suspend or resume quoting without being burdened by immediate public notification requirements— a standard practice in many larger markets—allows them to better manage their risk and capital during periods of high market volatility or technical issues, ultimately supporting the overall resilience of the ETF segment.
By continually reviewing and updating its framework, SGX RegCo demonstrates a proactive approach to maintaining a competitive edge against other major exchanges in the Asia-Pacific region.
These incremental improvements signal to global financial firms that Singapore is committed to facilitating a modern, efficient, and globally integrated trading environment for passive investment instruments.
