Navigating the regulatory perimeter is a key challenge for commodity market participants, particularly where they rely on their ability to operate within licensing exemptions. In Singapore, commodity groups commonly conduct dealing and advisory activities within the scope of licensing exemptions, although, depending on the facts, it may be necessary to consider whether they also carry on other types of regulated activity (e.g., operating a market, carrying on fund management, or moneylending).
As a first step in assessing an entity’s licensing position, the nature of the entity’s activities will need to be considered. For example, entities that trade over-the-counter commodity derivatives in Singapore may, in principle, conduct a regulated activity; however, some of those transactions (e.g., certain types of physically deliverable forward contract) may fall outside the scope of regulation. Once confirmed that the entity is, in principle, carrying on a regulated activity, it should be considered whether a licensing exemption is available – which may depend, for example, on the nature of the entity’s trading counterparty or whether the entity qualifies as an ‘approved global trading company’.