SGX corrects misconceptions

[chialc]

Our common agreements is the situation could be better handled.

We should all move forward rather than doing a blame game.

My only concern is how and what MAS will investigate...
a. the trader who manipulated the market?
b. the system of contra/short-selling?
c. the absent of circuit breaker?
d. company fraud?
e. directors/insider fraud?
or what????

The effects of regulator working over a few weekends and decision to suspend and designate and then "un-designate" a stocks is not a trivial matters.

Spots light is now on SGX and I'm sure the whole company is now busy doing/assisting the investigation...

I am holding my breath and see what's the results of these investigation...

I felt that the longer the investigation goes, the less dramatic the ending will be...

Let's see what's the review will be...

[corydorus]

"Designation" is not something that many retailers know of. Frankly i only know about this term due to this recent event.
Not sure i fully understand it even today on the restrictions imposed. The price collapse resulted maybe intended to avoid further manipulations. People who gamble on depending side taken, get burned. Lesson learned.

[sgpunter]

These penny stocks have been going up for so many months. One must wonder who and how the price was manipulated to such ridiculous levels. If not, the same people will lie low and wait to strike again when penny fever rages again.

That being said, SGX will take forever to find out the mystery behind the sharp increase in prices. By then all will be forgotten and everyone will be happy again.

Another issue is SGX's dual hat role. While it was happily earning good money during penny fever, would regulation have been more swift and efficient had it been an independent party looking at it?

[chialc]

"Designation" is not something that many retailers know of. ... Not sure i fully understand it even today on the restrictions imposed.

Frankly speaking, I think most people know what is a "designated securities".
However, I think only a handful people know exactly how and what is the actual/exact restrictions.

Go and read the article from the person who called SGX action amateur, it implies that even SGX itself is also not clear about what and how to execute the restrictions.

Don't believed me? Google and read carefully why he call SGX amateur...

As for myself, lesson learned ... Happily...

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SGX will take forever to find out the mystery behind the sharp increase in prices. ... Another issue is SGX's dual hat role.

Not too concern because MAS was the one who make the announcement on the review...

Should be ok to wait so long as the report/review is fair to shareholders of the designated securities.

[AlphaQuant]

Another issue is SGX's dual hat role. While it was happily earning good money during penny fever, would regulation have been more swift and efficient had it been an independent party looking at it?

i doubt another independent party will have done much more. When people do not have things at stake, there will be very little incentive for people to be fast and responsive.

The people to react fastest are the brokerages - they slapped trading limits before anyone else simply cos they could smell a rat and most importantly they have a lot to lose if things turn wrong.

[Clement]

I think the suspension and subsequent designation of the securities are seperate issues from the investigation to determine if there was any foul play.

I think all of us forumers would agree that the decision to investigate for market manipulation is the correct one. I do not know if anything technically illegal was done to inflate the bubbles but I think Sgx did the right thing in launching the probes.

The more complicated issue is whether regulators should step in to deflate asset bubbles. Regulators are normally hesitant to act directly to prick bubbles as it is difficult to objectively identify a bubble. This is also a very controversial action as the regulator is effectively picking winners and losers in the market. In this case, sgx decided that there was sufficient basis to label those stock prices as a bubble and acted to deflate it.

As to the execution, I think sgx has signalled beforehand, through queries, that they viewed the situation as abnormal. I think the suspension was more to allow investors time to study the fundamentals and decide on an appropriate course of action.

[CityFarmer]

Signalling is a very important aspect of the market mechanism. That's why we have profit warnings etc. Greenspan and indeed the Chinese govt understood this very well.

Suspension gave the wrong signalling. I totally disagree that the timing is right. Designation would have done the job in a much more orderly manner. It is amateur. They regulate the market like a bunch of academics. In order to tame the market you have to understand the market.

Time for disagreement.

A suspension is to allow investors have time to react, instead of in a panic manner. It shouldn't be seen as signalling. Queries was a signalling.

[specuvestor]

"Designation" is not something that many retailers know of. Frankly i only know about this term due to this recent event.
Not sure i fully understand it even today on the restrictions imposed. The price collapse resulted maybe intended to avoid further manipulations. People who gamble on depending side taken, get burned. Lesson learned.

Designation is not to catch the "retailers with money to pay up"... Designation is to signal to the contra and margin players. Designation will flush part of the speculation out of the system and it will self-feed.

Signalling is a very important aspect of the market mechanism. That's why we have profit warnings etc. Greenspan and indeed the Chinese govt understood this very well.

Suspension gave the wrong signalling. I totally disagree that the timing is right. Designation would have done the job in a much more orderly manner. It is amateur. They regulate the market like a bunch of academics. In order to tame the market you have to understand the market.

Time for disagreement.

A suspension is to allow investors have time to react, instead of in a panic manner. It shouldn't be seen as signalling. Queries was a signalling.

Yes time to disagree

Suspension doesn't give time to react because 1) we have no circuit breakers to stop irrational selling of vicious cycle... by the time it suspends damage is done 2) suspension signals to participants that SGX thinks there is a problem. The market see companies asking for suspension, and SGX suspending as VERY different.

Once faith is lost and stampede happens, even legit companies might collapse.

Querying has been a sham past few years, especially those S-chips. I don't even think market thinks it signals anything except administration.

[CityFarmer]

Time for disagreement.

A suspension is to allow investors have time to react, instead of in a panic manner. It shouldn't be seen as signalling. Queries was a signalling.

Yes time to disagree

Suspension doesn't give time to react because 1) we have no circuit breakers to stop irrational selling of vicious cycle... by the time it suspends damage is done 2) suspension signals to participants that SGX thinks there is a problem. The market see companies asking for suspension, and SGX suspending as VERY different.

Once faith is lost and stampede happens, even legit companies might collapse.

Querying has been a sham past few years, especially those S-chips. I don't even think market thinks it signals anything except administration.

Well, history has no if. I can't prove that it will be worse without a suspension. I reckoned investors already knew there was a problem, even without the suspension.

I do agree that querying isn't a strong signal nowadays. Speculators are ignoring it. A queries and a designation might be a more effective signal.

[mkmk]

SGX gave further clarification on why the actions taken for Sky One differs from Asiasons Capital Limited, Blumont Group Ltd and LionGold Corp Ltd.

http://infopub.sgx.com/FileOpen/20131030...eID=261749

Why SGX suspends, designates and investigates

SGX has been asked about the differences in regulatory actions taken in the case of Sky One Holdings Limited and in the case of Asiasons Capital Limited, Blumont Group Ltd and LionGold Corp Ltd. Our explanation is given below. We would also refer readers to our regulatory announcement of 25 October 2013 on “SGX corrects misconceptions.”

Suspension
Not all sharp price movements, whether up or down, warrant a suspension of the stock. Why and when would SGX suspend a stock? Each occurrence has to be evaluated on its own merit in the context of circumstances of the case.

In the case of Sky One, SGX’s review of the circumstances revealed no threat to fair, orderly and transparent trading. Hence, no suspension occurred.

In the case of Blumont, Asiasons and LionGold, SGX’s review showed disorderliness in the market, and lack of transparency which could also threaten the fairness of trading.


Designation
The same principle applies for designation of stocks. Each case is evaluated in the context of its own circumstances. In the case of Sky One, designation was not necessary. In the case of Blumont, Asiasons and LionGold, designation was instituted in order to remove the froth of excessive speculation in the market and permit the fundamentals to assert themselves in determining market prices.

Both suspension and designation are measures which help to return the market to finding its own equilibrium. For Blumont, Asiasons and LionGold, after the end of designation, the forces of supply and demand have reasserted themselves to determine the prices of the stocks. Normal trading conditions have resumed.


Investigation
Investigation of market misconduct is separate and distinct from regulatory tools SGX deploys to bring about fair, orderly and transparent trading in the market. It can be initiated by market activities observed during surveillance.

We understand the public wanting to know more about such investigations but releasing information prematurely could jeopardise the integrity of the investigation.

Furthermore, investigation into the trading of a particular security does not equate to the presence of wrongdoing. Nor does every investigation lead to conviction. It would be unfair if public announcement of an investigation tarnishes the reputation of the stock or of any individual investor.