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Beginner’s Guide on Starting a Commodity Trading Business in Singapore
Singapore is home to one of the best trading hubs in Asia. It comes as no surprise that commodities trading is also one of the business options that many investors are keen to pursue. Commodity trading in Singapore covers items, produce, articles of goods that are subject to four conditions. These four conditions are commodity forward contract, spot commodity trading, leverage commodity trading, and contracts that are drawn up pursuant to trading in differences.
What makes Singapore such an attractive option for starting a commodity trading business is that under the International Enterprise Singapore’s Global Traders Program, Singapore has more than 280 global trading companies in this hub alone. Included in this list are some of the world’s top agri-commodity groups. The country’s strategic location has a major role to play, not to mention how rich in resources the Asia Pacific region is.
With the help of Singapore company registration specialists like 3E Accounting, many investors have jump-started their businesses here in the region with much success. If commodities are an area you are looking to explore, this guide is here to help.
The Industry Practice for Commodity Trading in Singapore
Commodities trading involves the selling and buying of raw materials. Sometimes, it can involve the physical trading of these goods. Most of the time, however, commodities trading takes place through futures contracts. This means that you buy or sell a commodity at a specified price on a specific date.
In Singapore, this sector is a sector that is regulated strictly under the Commodity Trading Act 1992. Any individual or firm that is engaged in the commodities trading business will be subject to the regulations under this act. This means if you are planning on starting a commodity trading business in Singapore, you will need to adhere to the Commodity Trading Act.
The act outlines the legislation involved in trading commodity derivatives. Under the Commodity Trading Act, there are three main derivative sectors that are regulated:
- Brokering commodity derivatives
- Marketing commodity derivatives
- Clearing facilities for these commodity derivatives
As of February 2008, the Securities and Futures Act (SFA) now regulates commodity futures. The SFA operates under the Monetary Authority of Singapore (MAS), the sole regulator for all types of futures. This includes both commodities and financial futures. The Commodity Trading Act continues to oversee other commodity derivatives. They also monitor spot commodity trading that takes place in Singapore. Anything that is not already regulated under the SFA will fall under the authority of the Commodity Trading Act.
The Business Registration Process
Like every other business in Singapore, your commodities trading business must be registered with the Accounting and Corporate Regulatory Authority (ACRA). This is the regulating authority in Singapore for all businesses to operate legally in the country. Registering with ACRA is easy and can be done online by logging into BizFile. BizFile is an online platform that ACRA manages. You will need a SingPass ID to do this. If you don’t have a SingPass ID, our corporate service provider services can help you with that.
After registering with ACRA, you will then need to get it registered with the taxation authorities. Gather all your documents in order and prepare the details and particulars of the directors and shareholders of the company. If you are a foreign entrepreneur, you will need to submit a copy of your passport and your address as proof of residence.
Once you have received your certificate of incorporation, you can register for the Goods and Services Tax (GST). The company registration process in Singapore is very straightforward. In fact, if all your documents are in order and everything goes smoothly, 3E Accounting can help you get your business in order and complete this process within a day. If further documentation or assessment is needed, then your company registration process can take up to 14 days.
Licenses and Permits You Need
If you plan on starting a commodity trading business in Singapore, you will need a Capital Market License. This can be obtained from the Monetary Authority of Singapore. Other licenses and permits you might need include the following:
- Commodity Broker’s (CB) license
- Spot Commodity Broker’s (SCB) license
- Spot Commodity Pool Operator’s (SCPO) license
- Commodity Pool Operator’s (CPO) license
- Commodity Trading Adviser’s (CTA) license
- Commodity Futures Pool Operator’s (CFPO) license
The licenses you require depend on the commodities sector you intend to specialize in. You must hold one of these licenses unless you are exempted under Section 14A of the act. The list of exemptions is available under the Commodity Trading Act. Our company incorporation specialists will be able to offer more guidance once we have helped you assess your needs. You don’t need a license if you fall into the following categories:
- You are a trade only for your own account and are not involved in public funds
- You are dealing only with accredited investors*
- You are trading physical commodities in the course of your retail or wholesale business
- You also don’t need a license if you are:
- A finance or treasury center
- An approved international commodity-trading company
- A licensed bank or an approved merchant bank
- An approved oil-trading company
Documents You Need for Your License
To apply for your licenses, you must have the following documents:
- Detailed statements of your liabilities and assets (must be a signed copy); or
- Your latest balance sheet
- Your auditor’s report
- Your latest profit and loss statement
If you are submitting the last three documents, they must be certified true copies. These can be certified by the Company Secretary or the director of the company. It is an offense to run a commodities business in Singapore without a license.
Ready to Start Your Business?
Let the professionals help you begin your new venture on the right foot in Asia’s most sought-after business hub. If you are ready to launch your commodities business in Singapore, get in touch and contact 3E Accounting today.