CMFAS RES 2B OTC Derivatives: Products & Mechanics question: standardisation in the two markets

CMFAS RES 2BOTC Derivatives: Products & Mechanics

Which statement about standardisation in the two markets is CORRECT?

A Both markets are equally standardised, because both are regulated by MAS under the same SFA provisions
B OTC derivatives contract terms must be published by MAS before dealing, which standardises them
C OTC derivatives are always centrally cleared, while securities trades are settled bilaterally between the brokers
D Securities markets are largely standardised; OTC terms are privately negotiated and may be incompletely documented

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Answer: D. Securities markets are largely standardised; OTC terms are privately negotiated and may be incompletely documented

RES 2B section 4.1.1(iii): standardisation and supporting clearing facilities characterise the securities market; OTC derivatives are privately negotiated, not centrally cleared as a rule, and may be incompletely documented. This is why the ISDA Master Agreement and confirmation discipline matter.

Common mistake

Incomplete documentation is a named OTC weakness, not a securities-market one.

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Original study material mapped to the public CMFAS RES 2B syllabus. Unofficial, not endorsed by MAS or IBF. Verify figures and rules against current guidance before relying on them.