Sidley Updates

Singapore Proposes Measures to Prevent Unfair Crypto Trading and Address Market Integrity Risks

July 27, 2023

The Monetary Authority of Singapore (MAS) has issued a consultation paper proposing new measures to address market integrity risks in crypto trading and prohibit unfair crypto trading practices. Interested parties are invited to provide their comments to the proposals by August 3, 2023.

On July 3, 2023, the Monetary Authority of Singapore (MAS) issued a consultation paper proposing new measures to address market integrity risks in crypto trading and prohibit unfair crypto trading practices.

The proposals are a response to growing global recognition on the need for international consensus to address crypto asset market integrity concerns in an effective and coordinated way. The proposed measures seek to achieve regulatory outcomes for investor protection and market integrity in the crypto asset space that are the same as, or consistent with, those required in traditional financial markets.

Proposed Measures

The table below sets out a summary of the proposed measures.

Subject	Summary of New Measures
Measures applicable to all DTPSPs	Fair, orderly, and timely order execution A licensed or exempt digital payment token (DPT) service provider in Singapore (DTPSP) should maintain adequate policies and procedures, in a manner that is commensurate with its business, on: handling and execution of customers’ orders in a fair, orderly, and timely manner; and correction or cancellation of error trades. The above policies and procedures should be disclosed to customers. A DPTSP should not receive any commission or payment from other persons for routing customers’ orders to them. Comparable orders for different customers should be handled and executed according to time of receipt. Prevention of unfair trading practices A DPTSP should, on a real-time basis, monitor orders and transactions for unusual or suspicious activity. Fair and objective procedures should be put in place to investigate any potentially unfair trading practices. The DPTSP should take appropriate action (e.g., suspension of trading access) where necessary. Records of all on-chain and off-chain orders and transactions must be maintained for five years and provided to MAS upon request. Management of material non-public information (MNPI) A DPTSP should maintain a controlled list of persons with access to MNPI on a need-to-know basis. Information barriers should be put in place to restrict access to MNPI to privy persons only. A DPTSP should maintain policies and procedures on personal trading activities by its officers and employees.
Measures applicable to DPTSPs that operate a DPT trading platform	Fair, orderly, and transparent operation of DPT trading platforms A DPTSP that operates a DPT trading platform should maintain business rules that make satisfactory provision for the DPT trading platform to be operated in a fair, orderly, and transparent manner. The rules should include the following: objective, non-discriminatory, and transparent access criteria; execution protocols providing non-discriminatory access to, and equitable matching of, bids and offers; prohibition of unfair trading practices; correction or cancellation of error trades; controls to prevent disorderly trading (e.g., order entry controls) and corrective actions to be taken (e.g. trading suspension); and dissemination of pre-trade and post-trade information, alerts on unusual trading activities and warnings.
Measures applicable to all market participants	Prohibited market conduct Existing prohibitions against unfair trading practices as applicable to capital markets products will be introduced with the necessary modifications to DPTs. The prohibitions will cover the following conduct: false trading and market rigging; market manipulation; false or misleading statements; fraudulently inducing persons to deal; employment of manipulative and deceptive devices; bucketing and cornering; dissemination of information on illegal transactions; and insider trading.

Please refer to the consultation paper for further details.

Implementation

As a first step to implementing the proposals, MAS will issue guidelines to set out its expectations for DPTSPs as regard to the measures that will be applicable to DPTSPs. Thereafter, MAS will publish for consultation details on the regulatory requirements as well as legislative amendments. MAS indicated that it will work closely with DPTSPs to ensure that the measures are implemented in a timely and practicable manner.

In relation to the measures that will be applicable to all market participants, MAS will separately publish the relevant legislative amendments for consultation.

Interested parties are invited to provide their feedback to the proposed measures by August 3, 2023.

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