Reporting & compliance

📘 Basics of Reporting & Compliance for a Proprietary Trading Firm in Singapore

🔹 1. Licensing Requirements

Generally, proprietary trading firms are exempt from licensing in Singapore if they trade only with their own capital and do not deal with clients’ funds.

However, depending on the trading activities, you may still be subject to some regulation:

✅ When a License is Not Required:

Trading only your own funds.
Not soliciting or managing money for others.
No dealing in client securities or giving investment advice.

❗️A License May Be Required If:

You're market-making, offering trading platforms, or trading derivatives on behalf of others.
You're dealing in capital markets products as a business activity.

If any of the above apply, you'd typically need a Capital Markets Services (CMS) Licence under the Securities and Futures Act (SFA).

🔹 2. Entity Setup and Corporate Reporting

Even if you're not regulated under the SFA, your firm must comply with standard corporate and tax rules.

Company registration with ACRA (Accounting and Corporate Regulatory Authority).
Annual returns filing with ACRA.
Tax filing with IRAS (Inland Revenue Authority of Singapore):
- Corporate income tax (currently 17%).
- Possible exemptions or rebates depending on revenue.

🔹 3. Anti-Money Laundering (AML) & Counter-Terrorism Financing (CTF)

If you're not taking customer funds or acting as a financial institution, you're generally not subject to AML/CTF regulations under MAS.

However, if your activities involve:

Structured products,
Crypto trading,
Cross-border counterparties,

… then MAS might expect internal controls to prevent financial crime risk.

🔹 4. Compliance Best Practices (Even if Unregulated)

Even without MAS regulation, having solid internal governance can protect your firm, especially if you trade at high volumes or use automated strategies.

Here’s what good practice looks like:

Area

Best Practice

Trade Monitoring

Real-time surveillance, error logs, algorithm audit trails

Risk Management

Daily risk reports, drawdown limits, VAR or stress tests

Cybersecurity

Data protection policies, backups, penetration testing

Record-Keeping

Store trading records, internal approvals, strategy logs (min 5 years recommended)

Conflict of Interest

Document procedures for ethical trading, especially if traders are compensated based on performance

🔹 5. Tax and Trader Status

Singapore has no capital gains tax, which is very favorable for prop trading.
However, frequent trading activity might be considered business income and taxed accordingly — if questioned by IRAS.
You may need to justify your business model to IRAS, especially if you want to deduct expenses.

🔹 6. Employment and Work Passes

If you're hiring traders, ensure:

Employment contracts are in place.
You comply with MOM (Ministry of Manpower) requirements.
Work visas (e.g., EP or EntrePass) are applied for if hiring foreigners.

✅ Summary

Category & Key Points

Licensing

Not required if trading only firm capital and not serving clients

Regulator

MAS (Monetary Authority of Singapore)

Corporate Compliance

ACRA filings, IRAS taxes

Risk & Compliance

Internal controls, trade monitoring, cybersecurity

Taxation

No capital gains tax; frequent trading may be taxed as business income

Licensing Trigger Points

Managing third-party funds, dealing in derivatives, market-making.

Basic compliance checklist

Basic compliance checklist and a starter internal policy template tailored for a proprietary trading firm in Singapore. This setup assumes you're trading only with your own capital, so it focuses on what’s necessary and recommended — not overkill.

✅ Compliance Checklist for a Singapore Prop Trading Firm

Compliance and Reporting

📄 Internal Policy Template (Summary)

1. Introduction

This document outlines the internal compliance and risk policies of [Your Company Name], a proprietary trading firm operating in Singapore.

2. Business Model

The firm trades its own capital across public equities, futures, and/or derivatives. It does not manage third-party funds and is not licensed under the Securities and Futures Act (SFA), as it qualifies for an exemption.

3. Code of Conduct

All employees must act with integrity.
No insider trading or market manipulation.
Trading activity must align with firm-approved strategies.

4. Risk Management

Daily loss limit: SGD [X]
Monthly drawdown limit: SGD [X]
Maximum position size: [e.g., 10% of firm capital per trade]
Use stop-losses or hedging for high-volatility assets.

5. Trade Surveillance

All trades are logged and reviewed daily.
Algorithmic trading strategies must be tested in simulation environments before deployment.
Manual trade overrides must be documented.