The WFE (the World Federation of Exchanges), the global industry group for exchanges and central counterparties called CCPs, has recently given a response to MAS, the Monetary Authority of Singapore’s Consultation Paper on Proposed Regulatory Approach for Derivatives Contracts on Payment Tokens or so crypto assets.
The response given by WFE stresses the significance of the role of both the CCP and the exchange in the clearing and trading of derivatives contracts – an undertaking that can bring benefits to the entire society as well as increased opportunities for market participants. The response also notes that exchange-traded and centrally cleared derivative products undergo pre- and post-trade standard procedures set by the CCP and the exchange listing, while the established exchanges offer a specific venue.
The WFE currently embraces the proposal of the established regulated market infrastructure that will be recognized by MAS as the relevant market operators to conduct, while instilling the highest possible standards for crypto asset-based derivative products and their trading.
However, one thing that WFE also recommends that there is greater clarity and inclusion on how exactly third-country recognition processes may perform to allow third-country markets to trade Payment Token Derivatives.
WFE encourages that MAS keeps certain restrictions on trading when it comes to retail investors under review as the market becomes more mature and stability is created in the trading market. Such position will allow MAS to swiftly respond to any changes in the regulatory environment of cryptocurrency assets.
One interesting suggestion made by the WFE is about all trading platforms that do not adhere to the highest possible standards – the WFE recommends that such parties be restricted or banned from offering Payment Token Derivatives to retail or institutional investors. This will enable investors’ confidence to increase as they will have greater protection from downsides. WFE believes that such adherence to the highest trading standards will allow the market infrastructure to thrive and limit the extra investment that might be required by members of the WFE if all trading platforms were recognized.
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