Foreign Exchange CFD Licence
- a22162
- May 10
- 5 min read
Updated: Jun 16
Foreign Exchange CFD Licence Singapore
In Singapore, if a company wishes to offer Foreign Exchange (FX) Contracts for Difference (CFDs) to residents, it generally needs to obtain a Capital Markets Services (CMS) Licence from the Monetary Authority of Singapore (MAS).
Here's a breakdown of what that entails:
1. Regulated Activity:
Offering FX CFDs falls under the regulated activity of "Dealing in capital markets products" under the Securities and Futures Act (SFA) in Singapore.
MAS has recently reiterated its stance on unlicensed operations, blocking access to brokers like Octa and XM for providing forex and CFD services without a local license, even if they operate outside Singapore but target Singaporean persons. This highlights the importance of being properly licensed.
2. Key Requirements for a CMS Licence (General): While specific details for FX CFD dealing might have additional nuances, the general requirements for a CMS licence include:
Fitness and Propriety: The applicant, its shareholders, and directors must meet MAS's fit and proper criteria.
Track Record and Expertise: MAS assesses the track record and management expertise of the applicant and its parent company/major shareholders.
Financial Requirements: The company must meet prescribed minimum financial requirements, including base capital. For a broker-dealer offering CFDs or spot foreign exchange contracts for leveraged FX trading, they are required to collect margins from investors. The base capital requirement can range from S$50,000 to S$5 million, depending on the products offered, client type, and other factors.
Internal Systems: Strong internal risk management and compliance systems are essential.
Personnel: A minimum of two directors (at least one resident in Singapore) and a Chief Executive Officer (with at least 10 years of relevant experience and resident in Singapore) are typically required. Additionally, there needs to be a minimum of two full-time Singapore-based individuals for each regulated activity.
3. Specifics for FX CFDs:
Margin Requirements: MAS sets out specific minimum margin requirements for Foreign Exchange CFDs without stop-loss features. This is 2% for contracts with accredited, expert, or institutional investors, and 5% for contracts with customers who are not accredited, expert, or institutional investors. There are also specific requirements for CFDs with and without stop-loss features, and those subject to adjustments for dividends, interest, or commission.
Customer Knowledge Assessment (CKA): When opening a CFD account, clients usually need to meet CKA requirements, which can be satisfied through investment experience (e.g., at least 6 CFD trades in the preceding 3 years), educational qualifications in finance-related fields, or relevant working experience in investment products.
Risk Disclosure: Brokers are required to ensure clients acknowledge risk disclosures related to CFD trading.
Client Funds Segregation: Licensed brokers are required to hold customer funds in segregated accounts, separate from the firm's own monies.
4. Application Process:
Companies apply to MAS for the CMS licence.
There is a non-refundable application fee.
MAS conducts a review, and successful applicants may receive an in-principle approval (IPA), giving them up to 6 months to fulfill specified requirements before the licence is granted.
Important Note: The information provided here is a general overview. Obtaining a financial services license in Singapore is a complex process with detailed regulatory requirements. It is highly advisable for any company considering applying for such a licence to:
Consult the official MAS website and relevant legal statutes (e.g., Securities and Futures Act, Securities and Futures (Financial and Margin Requirements for Holders of Capital Markets Services Licences) Regulations).
Engage with legal and regulatory consultants specializing in financial services licensing in Singapore.
For individuals looking to trade FX CFDs in Singapore, they should ensure they are using a broker that is licensed by the MAS to offer these products. Reputable MAS-regulated brokers like OANDA and CGS International (CGSI) offer FX CFD trading in Singapore.
How Bestar can Help
Bestar plays a crucial role in helping businesses navigate the complex landscape of financial services licensing, especially in highly regulated jurisdictions like Singapore. Here's how we can help with obtaining and maintaining a Foreign Exchange CFD Licence from the Monetary Authority of Singapore (MAS):
1. Initial Assessment and Strategy:
Determining Licensing Needs: We assess your proposed business activities to determine if a MAS licence (like the CMS Licence for dealing in capital markets products) is indeed required, and if so, which specific categories apply. They can also advise on any potential exemptions.
Jurisdictional Expertise: We have in-depth knowledge of Singapore's financial regulations (e.g., Securities and Futures Act, Payment Services Act) and MAS's expectations, which are often nuanced and go beyond just the written rules.
Gap Analysis: We conduct a preliminary review of your existing operations, policies, and systems to identify any gaps or deficiencies that need to be addressed before applying for the licence.
Strategic Advice: We provide strategic advice on the most efficient and compliant path to obtain the licence, including potential structuring options for your business.
2. Application Preparation and Submission:
Comprehensive Documentation: We assist in preparing all necessary documentation for the MAS application, which can be extensive and includes:
Business Plan: Helping you articulate your business model, target market, risk management strategies, and financial projections in a way that aligns with MAS's expectations.
Application Forms: Guiding you through the completion of complex MAS application forms, ensuring accuracy and completeness.
Policy and Procedure Manuals: Developing or reviewing crucial manuals such as the Compliance Manual, Anti-Money Laundering (AML)/Counter-Terrorism Financing (CFT) Policy, Enterprise-Wide Risk Assessment (EWRA), and other operational policies tailored to FX CFD activities.
Resumes and Fit & Proper Assessments: Ensuring that key personnel (directors, CEO, representatives) meet MAS's fit and proper criteria and assisting with the submission of their credentials.
Liaison with MAS: We act as an intermediary, facilitating communication with MAS, addressing queries, and providing clarifications during the application review process. This can often involve multiple rounds of questions and discussions.
Pre-empting Issues: Leveraging our experience, we can anticipate potential issues or concerns that MAS might raise and help you proactively address them, which can significantly expedite the application process.
3. Ongoing Compliance and Post-Licensing Support:
Establishing Compliance Frameworks: Once the licence is obtained, we help establish a robust and effective compliance framework, including internal controls, monitoring systems, and reporting mechanisms to ensure ongoing adherence to MAS regulations.
Regulatory Updates: The financial regulatory landscape is constantly evolving. Consultants provide ongoing updates on new regulations, guidelines, and industry best practices, helping you adapt your operations accordingly.
Compliance Training: We can design and deliver tailored training programs for your staff and management on MAS regulations, internal policies, and their responsibilities.
Periodic Reviews and Audits: We can conduct independent compliance reviews or mock regulatory examinations to assess your compliance posture and identify any areas for improvement before an actual MAS inspection.
Risk Management: We assist in developing and implementing effective risk management frameworks, particularly crucial for FX CFD operations, covering market risk, credit risk, operational risk, and compliance risk.
Responding to Regulatory Enquiries: In the event of MAS inspections, audits, or queries, consultants can provide guidance and support in preparing responses and engaging with the regulator.
Technology and RegTech Advice: We can advise on leveraging technology solutions (RegTech) to enhance your compliance and risk management processes, making them more efficient and effective.
Benefits of Engaging Bestar:
Expertise and Specialization: We possess deep knowledge of financial services regulations, specific to Singapore and MAS, saving you significant time and effort in understanding complex requirements.
Increased Efficiency: Our experience streamlines the application process, reducing delays and increasing the likelihood of successful licence acquisition.
Risk Mitigation: We help identify and mitigate regulatory risks, preventing costly fines, reputational damage, or even licence revocation due to non-compliance.
Cost-Effectiveness: While there's a cost involved, it can be more cost-effective than attempting to navigate the complex regulatory environment without expert guidance, which could lead to mistakes, delays, and higher long-term costs.
Focus on Core Business: By outsourcing the regulatory heavy lifting, your team can focus on their core business operations and strategic growth.
Credibility: Engaging reputable consultants can also signal to MAS your commitment to robust compliance, potentially enhancing your application's credibility.
In summary, Bestar acts as invaluable partners for businesses seeking to operate in the regulated financial services sector in Singapore, providing end-to-end support from initial strategy to ongoing compliance.
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