No. S 578
Commodity Trading Act
(Chapter 48A)
Commodity Trading Regulations 2001
In exercise of the powers conferred by sections 13A, 16, 22, 30 and 63 of the Commodity Trading Act, the Trade Development Board, with the approval of the Minister for Trade and Industry, hereby makes the following Regulations:
PART I
preliminary
Citation and commencement
1.  These Regulations may be cited as the Commodity Trading Regulations 2001 and shall come into operation on 28th November 2001.
Definitions
2.  In these Regulations, unless the context otherwise requires —
“accounts”  —
(a)means profit and loss accounts and balance-sheets; and
(b)includes notes (other than auditor’s reports) attached to or intended to be read with the profit and loss accounts or balance-sheets;
“bank” means any body corporate licensed to carry on banking business under the Banking Act (Cap. 19);
“business day” means any day which the respective Commodity Futures Exchange, commodity futures market or commodity market is open for trading or deliveries;
“connected person”, in relation to a director of a body corporate, includes —
(a)his spouse, son, adopted son, step-son, daughter, adopted daughter, step-daughter, father, mother, brother or sister; and
(b)a firm, corporation or company in which any of the persons mentioned in paragraph (a) or the director is in a position to control not less than 20% of the voting power in the firm, corporation or company, whether such control is exercised individually or jointly;
“contract confirmation note” means a statement sent by a commodity broker, commodity futures broker or a spot commodity broker to a customer when there is a change in the customer’s positions, showing the number of contracts involved, the price at which the contracts were transacted, commission charges and the net profits or losses on the transactions;
“customer’s account” means a current or deposit account at a bank, merchant bank, clearing house, a commodity broker, commodity futures broker, spot commodity broker or any other person approved by the Board, in the name of the commodity broker, commodity futures broker, or spot commodity broker or commodity pool operator or commodity futures pool operator, in the title of which the word “customer” appears;
“long” means the purchase of a commodity contract, commodity futures contract or spot commodity contract to establish a position;
“margin” means an amount of money or collateral deposited by the buyer or the seller of a commodity contract, commodity futures contract or spot commodity contract to ensure performance of the terms of the contract;
“margin call” means a request from a Commodity Futures Exchange, commodity market, clearing house, commodity broker, commodity futures broker or spot commodity broker to a customer to deposit additional margins to meet a required minimum margin level;
“mark-to-market” means the process whereby the daily closing price of a commodity contract or commodity futures contract is used to value all outstanding positions of that contract at the end of the day and to establish the resulting gains and losses;
“merchant bank” means a merchant bank that is approved under the Monetary Authority of Singapore Act (Cap. 186);
“net asset value” means the total assets minus total liabilities determined in accordance with generally accepted accounting principles with each contract position valued at the prevailing market price;
“participant” means a person who has a direct financial interest in a commodity pool, commodity futures pool or a spot commodity pool;
“position” means a commodity contract, commodity futures contract or spot commodity contract which is outstanding and has not been liquidated by an offsetting transaction or by delivery of the commodity underlying the contract or through settlement of the contract in accordance with the rules of a Commodity Futures Exchange, commodity futures market, commodity market or any spot commodity market, or the practices of a commodity futures market, commodity market or any spot commodity market;
“property” includes movable and immovable property, and any estate, share and interest in any property, movable or immovable, and any debt, and anything in action, and any other right or interest, whether in possession or not;
“securities” has the same meaning as in the Securities Industry Act (Cap. 289);
“senior creditor” means a creditor who for the time being holds or is entitled to the senior debt;
“senior debt” means the unpaid claims of all creditors for the time being of a commodity broker, commodity futures broker or spot commodity broker, however incurred;
“short” means the sale of a commodity contract, commodity futures contract or spot commodity contract to establish a position;
“stock market” has the same meaning as in the Securities Industry Act;
“trading programme” means a system, method or programme which a commodity trading adviser or commodity futures trading adviser may use to direct or guide a customer’s commodity contract or commodity futures contract account.
Net capital
3.—(1)  For the purposes of these Regulations —
“current assets”, in relation to a commodity broker, commodity futures broker or spot commodity broker, means cash and other assets which are reasonably expected to be realised in cash or sold within a period of 12 months and shall —
(a)exclude any unsecured commodity contract, commodity futures contract account or spot commodity contract account containing a debit balance which has remained unpaid for more than one business day;
(b)exclude all unsecured advances, loans and other receivables except for dividends, interest and commissions due within 30 days and receivables from merchandising incurred in the normal course of business due within 90 days;
(c)exclude all assets doubtful of collection or realisation except for any reserves established therefor; and
(d)include receivables from clearing houses and from the commodity broker, commodity futures broker or spot commodity broker arising out of commodity contract, commodity futures contract or spot commodity contract transactions, and shares and securities which are listed on a stock market and have not been suspended;
“net capital”, in relation to a commodity broker, commodity futures broker or spot commodity broker, means the amount by which current assets exceed liabilities, and in determining net capital —
(a)unrealised profits shall be added and unrealised losses shall be deducted in the accounts of the commodity broker, commodity futures broker or spot commodity broker, including unrealised profits and losses on fixed price commitments and forward contracts; and
(b)all long and all short commodity contract, commodity futures contract or spot commodity contract positions shall be marked to their market value.
(2)  A loan or advance or any other form of receivable shall not be treated as “secured” unless
(a)the receivable is secured by collateral which is unencumbered and can be readily converted into cash; and
(b)the commodity broker, commodity futures broker or spot commodity broker —
(i)is in the possession or control of the collateral; or
(ii)has a legally enforceable written security agreement executed by the debtor in his favour under which he shall have the power to readily sell or otherwise convert the collateral into cash.
(3)  A receivable referred to in paragraph (2) shall be considered only to the extent of the market value of such collateral after publication of such percentage deductions as are set out in regulation 4.
(4)  For the purposes of computing “net capital”, the term “liabilities” shall exclude —
(a)liabilities of a commodity broker, commodity futures broker or spot commodity broker which are subordinated to the claims of all general creditors of the broker pursuant to a satisfactory subordination agreement as defined in paragraph (5);
(b)the amount of money, securities and property due to customers which are held in segregated accounts in accordance with regulations 21 and 22 if such money, securities and property have been excluded from current assets in computing net capital; and
(c)liabilities which would be classified as long term liabilities in accordance with generally accepted accounting principles to the extent of the net book value of plant, property and equipment used in the ordinary course of the broker’s business, provided that such plant, property and equipment are not included in current assets.
(5)  In paragraph (4)(a), “satisfactory subordination agreement” means an agreement between the commodity broker, commodity futures broker or spot commodity broker and his lender (referred to in these Regulations as the subordinated creditor) which shall be in such form and shall contain such terms as the Board may, from time to time, require.
(6)  Without prejudice to the generality of paragraph (5), a subordinated agreement shall contain the following terms:
(a)the subordinated creditor will not claim or receive from the commodity broker , commodity futures broker or spot commodity broker by set-off or in any other manner, any subordinated debt unless and until all senior debt has been paid or, except with the prior written approval of the Board, or in the case of a commodity futures broker which is a member of a Commodity Futures Exchange, with the prior written approval of the Commodity Futures Exchange ;
(b)in the event of any payment or distribution of assets of the commodity broker, commodity futures broker or spot commodity broker, in cash, in kind or in securities (referred to in these Regulations as a distribution), upon any dissolution, winding-up, liquidation or re-organisation of the broker —
(i)the senior creditors shall first be entitled to receive payment in full of the senior debt before the subordinated creditor receives any payment in respect of the subordinated debt; and
(ii)any distribution to which the subordinated creditor would be entitled but for this paragraph shall be paid or delivered by the liquidator, Official Assignee in bankruptcy or any other person making the distribution directly to the senior creditors rateably according to their senior debt until they have been paid in full (taking into account other distributions to the senior creditors); and
(c)if, notwithstanding sub-paragraphs (a) and (b), any distribution is received by the subordinated creditor in respect of the subordinated debt, such distribution shall be paid over to the senior creditors for application rateably against their senior debt until the senior debt has been paid in full (taking into account other distributions to the senior creditors), and until such payment in full is made, such distribution shall be held on trust for the senior creditors.
Adjusted net capital
4.—(1)  For the purposes of these Regulations, “adjusted net capital” means net capital less the following:
(a)the amount by which any advances paid by the commodity broker, commodity futures broker or spot commodity broker on cash commodity contracts, commodity futures contracts or spot commodity contracts and used in computing net capital exceeds 95% of the market value of the commodities covered by such contracts;
(b)in the case of all inventories which are hedged by hedging positions in any commodity market or commodity futures market, the amount by which the value of such inventories used in computing the net capital exceeds 95% of the market value of such inventories;
(c)in the case of all inventories which are not hedged by any hedging positions in any market, the amount by which the value of such inventories in computing the net capital exceeds 80% of the market value of such inventories;
(d)in the case of any Government security issued under the Government Securities Act (Cap. 121A) used by the commodity broker, commodity futures broker or spot commodity broker in computing the net capital, the amount by which the value of such security exceeds 100% of the market value of such security;
(e)in the case of shares and other securities used by the commodity broker, commodity futures broker or spot commodity broker in computing the net capital, the amount by which the value of such shares or securities exceeds 90% of the market value of such shares or securities;
(f)in the case of under-margined commodity contracts, commodity futures contracts or spot commodity contracts accounts belonging to customers, the amount of money required for each account to meet the relevant maintenance margin requirements, if such amount has been outstanding (after call) for more than 3 business days, or there are no such relevant maintenance margin requirements then, when the original margin has been depleted by 50% or more, the amount of money required to restore the original margin if such amount has been outstanding (after call) for more than 3 business days; and
(g)the relevant margin requirement on open commodity contracts, commodity futures contracts or spot commodity contracts held in the proprietary accounts of the commodity broker, commodity futures broker or spot commodity broker which are hedged.
(2)  For the purpose of paragraph (1), if —
(a)a deficit is excluded from current assets in accordance with that paragraph, such amount shall not be deducted to determine adjusted net capital; and
(b)a customer has deposited any asset other than cash into his account, the value attributable to such asset to determine the adjusted net capital shall be the value attributable to the asset pursuant to the relevant margin rules of a Commodity Futures Exchange, commodity futures market, commodity market or spot commodity market.
Forms
5.—(1)  The Board may, for the purposes of these Regulations, determine and design such forms as it may think fit and such forms shall be used in all cases in which they are applicable.
(2)  The Board may require for the completion of such forms by the insertion of or the attachment to the form of any document.
(3)  The forms may be modified by the Board as it thinks fit.

Made this 20th day of November 2001.

STEPHEN LEE
Chairman,
Trade Development Board,
Singapore.
[TDB 07 01 07 V11; AG/LEG/SL/48A/2001/1 Vol. 1]