Guidelines to MAS Notice SFA 04-N16 on Execution of Customers' Orders

The MAS revised the Guidelines to MAS Notice SFA 04-N16 on Execution of Customers' Orders on 4 November 2022 to prohibit: 

• capital markets services licensees; and
• exempt capital markets services licensees (that are licensed banks, licensed merchant banks and licensed finance companies),

(together “CMS Brokers”) from receiving payment for order flow (“PFOF”) in placing and/or executing customers’ orders. 

PFOF refers to commissions or other forms of payment which a CMS Broker receives from another broker or counterparty in return for routing customers’ orders to that broker or counterparty. 

This is as PFOF may give rise to conflicts of interest and is likely to cause harm to customers, as CMS Brokers may be incentivised to pursue such forms of payment in return for routing customers’ orders to that broker or counterparty for its own benefit, and is inconsistent with the CMS Broker’s duty to provide Best Execution to customers. 

This prohibition will take effect on 1 April 2023.