SGX proposes rules on short selling
by admin , July 23, 2010, 1600hrs

SINGAPORE (July 23, 2010) – Following a first round of public consultation to increase transparency of short selling , the Singapore Exchange (SGX) is proposing to implement new rules and measures to provide more information on such activities in the marketplace.

The proposals – which will undergo another round of public consultation - centre around two suggestions distilled from the earlier public consultation: The marking of short sell orders and publication of short selling statistics; and reporting of substantial short positions.

Adding that the latest consultation exercise was introduced after close discussions with the Monetary Authority of Singapore, SGX reiterated that such timely information “provides greater disclosure and contributes to enhanced accountability”.

“The MAS is fully supportive of the proposed measures,” SGX noted.

SGX defines a short sell order as “any sell order where the seller does not own the security to be sold at the time of placing the order”. For example, where an investor sells a quantity in excess of what he owns for a security, he can enter two separate sell orders. One order is for the portion he owns and the other for the portion he short sold.

The requirement to mark sell orders apply to all securities listed on SGX-ST, with the
exception of Extended Settlement Contracts.

This marking of sell orders also extends to Direct Business trades and the selling trading member must indicate a short sell order or a normal sell order in the "Married Trade Reporting" system.

“With the collated data, SGX proposes to report the short sales volume and value by counter for each trading day,” it said.

To facilitate the marking of sell orders, SGX requires its trading members to put in place safeguards and procedures to ensure that customers indicate their sell orders, whether the trade is conducted via the internet, phone orders and/or the members’ order management systems.

Each of the respective trading interfaces must require the customer to determine whether a
sell order is a short sell order or a normal sell order at the point of order entry. The trading member or its Trading Representative cannot transmit a sell order to SGX if the customer has not made his/her order indication. The trading member is however not required to verify the accuracy of the customers’ orders.

Meanwhile, SGX CEO Magnus Bocker has confirmed press reports that the bourse is thinking of scrapping the 90-minute lunch break - a suggestion that has not gone down too twll with stock traders and remisiers.

Adding that SGX is in discussions with market participants on the proposal, Mr Bocker told reporters that such a move could boost trading volumes by 10 per cent – as it would allow investors to capitalise on late market action in Tokyo, Shanghai and Sydney, as well as early trading in Mumbai.

However, he reiterated that it was still too early to say when the move could be implemented.