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SINGAPORE — The Monetary Authority of Singapore (MAS) and Singapore Exchange (SGX) have proposed that punters with open positions be made to put up collateral in an effort to ensure more orderly trading of stocks listed on SGX.
The proposal is one of several measures put up by the MAS and SGX in a consultation paper to promote orderly trading and responsible investing in Singapore-listed stocks.
Interested parties have until May 2 to submit their views and comments.
Other proposals include setting a minimum price for stocks listed on the Mainboard to reduce volatility, as well as a requirement that trading curbs implemented by stockbroking firms be announced through the SGX website, the MAS and SGX said in a joint statement.
The SGX today (Feb 7) separately announced several new rules that would take effect from March 3.
These include publication by the bourse operator of a “trade with caution” announcement whenever a company is unable to explain unusual trading activities. The company’s board of directors will also be required to approve a reply to a public query by the SGX.
“Today’s world is fast-changing and we need to strengthen Singapore’s securities market to meet the expectations of investors and companies,” SGX Chief Executive Magnus Bocker said.
The MAS said Singapore’s stock market is fundamentally sound and the consultation is aimed at initiating a conversation with stakeholders to strengthen regulations.
The proposed new regulations for trading stocks on the SGX come a few months after the share prices of Singapore-listed Blumont Group, LionGold and Asiasons fell sharply in a matter of days, wiping out billions of dollars in market value. CHANNEL NEWSASIA
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This will affect the revenues of SGX and IRAS.
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I think we might be moving towards HK model
cash down but lower trading cost, 15 basis points instead
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Another nail in the coffin for remisiers!
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SGX proposes reforms to curb speculative trading
Measures target contra trades and short-selling, among others
Published on Feb 08, 2014
By Alvin Foo
SHARE trading in Singapore could be headed for some major changes in the wake of last October's penny stock crash if new proposals by regulators go ahead.
It could curb the speculative nature of so-called "contra trading", a practice unique to Singapore and Malaysia.
This involves traders buying shares without cash upfront and reselling them within three days, pocketing or paying up the profit or loss rather than the full sum.
Critics say this practice encourages highly speculative trading. Contra trading formed 31 per cent of local market turnover.
The changes being proposed by the Monetary Authority of Singapore (MAS) and the Singapore Exchange (SGX) are designed to strengthen the local market.
The proposal that could lower the credit risk of contra trading would require traders to lodge 5per cent collateral of unsettled positions by the end of a trading session. This means an investor wanting to buy 1,000 DBS Group Holdings shares costing $16,350 needs to put 5 per cent of that sum, or $817.50, in collateral either in cash or stocks or bank guarantee, with the brokerage.
SGX also plans to shorten the share settlement period from three days to two days by 2016 to reduce its credit risk exposure.
Another suggestion is to have investors' short-selling positions disclosed. Short-selling is selling shares one does not own.
Also under consideration is a minimum trading price of, say 10 to 20 cents for mainboard-listed shares to curb excessive speculation. This could affect 130 to 230 listed firms, which will be given three years to get ready for the change if implemented.
A public consultation paper has been issued. Interested parties have until May 2 to give feedback.
Mr Lee Chuan Teck, MAS assistant managing director of capital markets, said the consultation was aimed at making the market "stronger and more mature". SGX chief Magnus Bocker said it encompassed "structural and regulatory aspects crucial to a well-functioning securities market".
Industry players such as OCBC Securities managing director Raymond Chee said the proposed minimum collateral requirement would promote prudent investing and lower the financial exposure for brokerages from such trades.
Mr David Gerald, president of Securities Investors Association (Singapore), said it would "discourage a gambling mentality and encourage an investing mindset".
But UOB Kay Hian senior executive director Esmond Choo also noted that this could restrict the ease of trading here, especially for small amounts. There is also the concern of how to administer the collateral collection, he added.
alfoo@sph.com.sg
SEE MONEY
Background story
Some of the proposals
Brokerages to require clients to put up collateral of at least 5 per cent on any unsettled purchases;
Settlement period to be cut from transaction plus three days (T+3) to T+2 days by 2016;
A minimum trading price of, say, 10 cents to 20 cents for mainboard-listed firms;
Introduce "short-selling" reporting requirements;
Brokerages to announce on the SGX website any trading curbs they impose on trading of a listed firm's shares;
SGX will publish a "trade with caution" announcement when a listed firm is unable to explain unusual trading activities when it is queried.
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(07-02-2014, 08:53 PM)funman168 Wrote: Another nail in the coffin for remisiers!
Why are remisiers affected? I though its on the exchange clearing and trading fees that are reduced. Not brokerages fees. In fact, I think brokerage fees are still fat compare to other exchanges. I dun mind paying $4 to sgx, but I dun see why I need to pay 30 dollars or more to kayhian when I dun use their features and dun find their research useful
life goes in cycles, predictable yet uncontrollable; just like the markets, but markets give you a second chance
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If this was proposed by MAS and SGX, believe it is more or less a " done deal ".
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(08-02-2014, 10:37 AM)valueinvestor Wrote: If this was proposed by MAS and SGX, believe it is more or less a " done deal ".
"The Monetary Authority of Singapore (MAS) and Singapore Exchange (SGX) have proposed..."
can't you read?
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