MAS confirms regulatory approach for best execution and timeline for compliance.

By Farhana Sharmeen and Marc Jia Renn Tan

On 3 September 2020, the Monetary Authority of Singapore (the MAS) issued a response to feedback about its proposal for capital markets service license holders, banks, merchant banks, and finance companies that conduct certain regulated activities (Capital Markets Intermediaries) to establish policies and procedures to place and/or execute customers’ orders on the best available terms (Best Execution).

Scope of Best Execution Requirements

The MAS response reaffirmed that all customers’ orders are to be covered under the Best Execution policies and procedures if the activities are regulated under the Securities and Futures Act, Chapter 289 of Singapore (SFA). This applies regardless of the Capital Markets Intermediary’s capacity (i.e., agent or principal) or whether customer orders are passed within the same Capital Markets Intermediary (in which case, the entity as a whole has to achieve Best Execution).

Capital Markets Intermediaries are obligated to achieve Best Execution on an ongoing basis, regardless of the execution venue (i.e., on-exchange or off-exchange). If a related entity of a fund management company (FMC) conducts the dealing function for the FMC in another jurisdiction, the FMC has to ensure that such related entity provides for Best Execution on an equivalent basis.

The MAS confirmed in its response that the Best Execution requirements apply to “all capital markets products that fall within the definition of securities, units in a collective investment scheme (CIS), derivatives contracts, or spot foreign exchange contracts (SFEC), for the purposes of leveraged foreign exchange trading”, with the exception of SFECs that do not fall within the SFA’s scope.

The MAS also clarified that the Best Execution requirements apply to all types of customers served by a Capital Markets Intermediary except in the following cases:

  • Institutional investors including their affiliates that are institutional investors: Best Execution requirements do not apply to such customers on the basis that they are sufficiently sophisticated. However, Best Execution requirements will apply when a FMC or real estate investment trust management company places or executes an order for a CIS.
  • Accredited investors, expert investors, and institutional investors (collectively, Non-Retail Investors): If a Capital Markets Intermediary assesses that a Non-Retail Investor does not rely on the Capital Markets Intermediary to achieve Best Execution, the Best Execution requirements do not apply. Assessment criteria may include whether the customer initiates the order or specifies the execution venue or price at which the trade should be executed. The assessment’s frequency and criteria are to be clearly documented in the Capital Markets Intermediary’s policies and procedures.

The Best Execution requirements do not prohibit Capital Markets Intermediaries from executing trades only on certain venues or brokers, so long as Best Execution is achieved on a consistent basis.

Determination of Best Execution

Capital Markets Intermediaries are to establish and implement Best Execution policies and procedures that are approved by their board of directors, and periodically review those policies and procedures to ensure their relevance. The board of directors may delegate its approval and review to relevant management committees. If the Capital Markets Intermediaries are part of groups, they may rely on group policies and procedures that meet MAS requirements.

Capital Markets Intermediaries are expected to comprehensively take into account factors such as the characteristics of the execution, settlement, and customer order, if appropriate, to achieve Best Execution. The MAS reaffirmed that Capital Markets Intermediaries may decide for themselves the applicability and relative importance of such factors for its capital markets products on a case-by-case basis. The methods and tools used by Capital Markets Intermediaries to monitor Best Execution are to be proportionate to the size, nature, and complexity of their business (and of the instruments traded) — i.e., not all Capital Markets Intermediaries are required to use sophisticated tools or software.

Capital Markets Intermediaries are to proactively disclose their Best Execution policies in a clear manner to their customers. Disclosure may be provided on their website, in their general terms and conditions, or in their customer agreement. The MAS has also confirmed that Capital Markets Intermediaries may carve out exceptions in their Best Execution policies and procedures if executing comparable orders following the time of receipt is not practical or in customers’ best interest.


The MAS has provided an 18-month transitional period (from 3 September 2020 to 3 March 2022) for Capital Markets Intermediaries to formalise their policies and procedures, and implement the Best Execution requirements as also set out in the MAS Notice on Execution of Customer’s Orders and the accompanying guidelines.

Financial institutions should review their existing execution order practices, including when third party order routing services are used, and ensure that appropriate updates are made well ahead of the effective date to ensure compliance with the new guidelines.

Approved Exchanges and Singapore-Incorporated RMOs

The MAS also issued a MAS Notice on Execution of Orders by Market Operators (Market Operator Notice) requiring market operators that exercise discretion in placing or executing orders to establish and implement written policies and procedures on Best Execution, and to place and execute comparable customers’ orders in accordance with the time of receipt of such orders. The Market Operator Notice took effect on 4 September 2020 and applies only to approved exchanges and recognised market operators (RMOs).