Get information on Singapore’s Commodity Trading Act
Commodity Trading Act
The Singapore Government takes a firm stance against unlicensed commodity trading firms and individual traders, and illegal commodity trading activities. This is to eliminate “bucket shops” and promote a fair and transparent commodity trading environment in Singapore.
“Bucket shops” are firms that entice people through various tactics to open trading accounts with them but on contractual terms that are favourable towards these firms. The shops might “bucket” (claiming to effect transactions for the clients when they did not) or “churn” (make repeated transactions to earn commissions from the clients, causing clients to lose their entire investment.
To achieve this, the Commodity Futures Act (CFA) was initially enacted in 1992 to regulate trading in commodity futures contracts. It was mainly designed to approve and regulate commodity futures exchanges and clearing houses, provide for the licensing of commodity futures brokers, commodity futures trading advisers, commodity futures pool operators and their representatives), impose statutory requirements on such persons with regard to audit and disclosures to their customers and to provide for a system for the conduct of such persons to ensure adequate protection to investors. Initially it covered only commodity futures contracts that were traded at the Singapore Commodity Exchange (SICOM), namely rubber and coffee.
This Bill seeks to amend the Commodity Trading Act (Cap. 48A) to transfer regulatory oversight of futures from the International Enterprise Singapore Board (IE Singapore) under that Act to the Monetary Authority of Singapore (MAS) under the Securities and Futures Act (SFA) and the Financial Advisers Act (FAA).
The CFA was amended by the Government in 2001 to become the Commodity Trading Act (CTA). The scope under CTA was expanded to cover all commodities and all forms of commodities trading activities, including brokering or advisory functions in relation to trading in commodity futures contracts, commodity forward contracts, leveraged commodity trading, trading in differences and spot commodity trading.
The CTA was further amended in 2008, and regulatory oversight of commodity futures was transferred from IE Singapore to the Monetary Authority of Singapore (MAS). The CTA now covers all commodities and regulates commodity trading activities, including commodity forward contracts, leveraged commodity trading, trading in differences and spot commodity trading etc.
Role of Agencies
International Enterprise (IE) Singapore is the regulatory body responsible for administering the CTA.
A firm or individual dealing in any form of brokering activities for commodity trading (other than the brokering of commodity futures) must apply for a licence and abide by the regulations under the CTA (unless specifically exempted under the Exemption Schedule Section 14A of the CTA).
The CTA promotes bona fide trading as well as protect investors and the public against bucket shops. The public will also be able to check online whether the firm or individual that they are dealing with has been licensed before dealing with them in commodity trading activities. A list of companies licensed under the CTA can be found here.
While the CTA provides a safeguard for the public, the public must also remain vigilant and be wary of fraudulent firms and individuals in commodity trading.