Singapore Exchange Granted Clearing Certification by CFTC

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According to the Financial Times, US regulators will now allow the Singapore Exchange to clear over-the-counter derivatives trades for American customers. This makes the Singapore Exchange the first Asian exchange to be granted this certification.

After the 2008 finical crises, the US passed the Dodd-Frank Act in order to help police the derivatives market, which is often cited as a major cause of the crisis. One of the requirements of the Dodd-Frank Act is that derivative trades be processed through clearing houses like the Singapore Exchange, guarding the market against any negative impacts that could occur should one of the parties of a trade default.

With this approval, the Singapore Exchange can now offer US traders local clearing services for products like iron ore swaps, interest rate swaps and non-deliverable foreign exchange forwards.

Approval for the Singapore Exchange came just as the Commodity Futures Trading Commission and the Monetary Authority of Singapore agreed to work together in supervising financial institutions that will involve both US and Singapore derivative markets.

Singapore is expected to mandate all trading be cleared through clearing houses sometime after the middle of 2014, bringing it up to pace with US and European regulations.

The Singapore Exchange is still waiting on similar approval from European regulators.