SGX corrects misconceptions

[chialc88]

Silvan/BT wrote that there is a contradiction (which is similar to why SGX action is viewed as A******:

When SGX classify the trio as designated securities, reports from brokers were that they were told by the exchange not to allow contra trading, even for clients who had already paid upfront.

This caused tremendous confusion and unhappiness among dealers and their customer.


+++++++++++++
For one, I was so scare that I got my broker/brokage house into trouble by pushing my stories...





A Life not Reflected is a Life not Worth Living.

[Clement]

Silvan/BT wrote that there is a contradiction (which is similar to why SGX action is viewed as A******:

When SGX classify the trio as designated securities, reports from brokers were that they were told by the exchange not to allow contra trading, even for clients who had already paid upfront.

This caused tremendous confusion and unhappiness among dealers and their customer.


+++++++++++++
For one, I was so scare that I got my broker/brokage house into trouble by pushing my stories...





A Life not Reflected is a Life not Worth Living.

The confusion was not the fault of sgx. The intention to require shares in cdp accounts before selling was clear. Those of us with trading representative licenses know what "designated securities" meant and it is covered as part of the test for dealing licenses. Some dealers just forgot the rules and ended up giving their clients poor advice.

[brattzz]

contra is given by brokerhouse right? so the brokerhouse bear the risk lah... :O

[chialc]

The intention to require shares in cdp accounts before selling was clear

Intention is clear but did SGX has the power to declare and enforce that?

Think again...
Mmm... the person who says SGX action ... Amatuer .... might know the answer...

Let's wait for MAS to complete its review and see what will be in the report.

[Clement]

The intention to require shares in cdp accounts before selling was clear

Intention is clear but did SGX has the power to declare and enforce that?

Think again...
Mmm... the person who says SGX action ... Amatuer .... might know the answer...

Let's wait for MAS to complete its review and see what will be in the report.

http://rulebook.sgx.com/en/display/displ...nt_id=1143

It is entirely within sgx regulatory tools to impose such a requirement.

[specuvestor]

SGX is empowered to designate a share or even delist. It can even disallow certain corporate actions. Question is the execution, or sometimes the lack of it.

In this case my issue is that SGX should have designated the trio rather than suspending them and hence signalling the wrong message. As per the Blumont thread, I had cautioned coincidentally just before the wreck. Everyone knows it's a bubble but that does not excuse SGX from poor execution, not understanding the markets and in the end bring pain to many because the officer-in-charge chose the wrong tool to impose.

[Clement]

SGX is empowered to designate a share or even delist. It can even disallow certain corporate actions. Question is the execution, or sometimes the lack of it.

In this case my issue is that SGX should have designated the trio rather than suspending them and hence signalling the wrong message. As per the Blumont thread, I had cautioned coincidentally just before the wreck. Everyone knows it's a bubble but that does not excuse SGX from poor execution, not understanding the markets and in the end bring pain to many because the officer-in-charge chose the wrong tool to impose.

The way I see it was that the people who were stuck in the shares were going to lose almost everything anyways. Would designating it first help? Iirc, on the day of the suspension, Blumont shares fell from above $2 the previous day to 88 cents within a couple of hours before trading was stopped. Given the extreme valuations, I don't think a soft landing was possible, and therefore Sgx was probably right in deflating the bubble as quickly as possible.

[specuvestor]

Suspension induced fear. Designation will deflate the stock more orderly.

Which do you prefer: $2 to 88cents overnight or $2 to 88cents over 3 months? This may sound simple but is actually a question routinely asked during the GFC. Do you want markets to get hit immediately or kick the can down the road for a slower death?

Personally as a pragmatist I prefer the latter as markets and people adjusts. Caveat is of course we must solve the ROOT problem and not kick the can down indefinitely. For the GFC the regulators had done next to nothing to solve the problem though A for easing the pain.

In this case, SGX should consider 1) their handling of this trio sucks and should have done designation first instead of suspension 2) have limit down rules so people can find out more info and adjust expectations accordingly instead of vicious cycles 3) increase monitoring of high price increases and impose designations earlier, say 25% over a month and company revert dunno why 4) Have more teeth in executing regulation rather than take it as admin work or focus on listing fees

"Perfect market" believers will think to take the hit direct is better. They have not seen recessions but classrooms.

[egghead]

Which do you prefer: $2 to 88cents overnight or $2 to 88cents over 3 months? This may sound simple but is actually a question routinely asked during the GFC. Do you want markets to get hit immediately or kick the can down the road for a slower death?

I see your point; but there is an assumption here that by designating the stock(s) earlier, the fall from $2 to $0.8 will be gradual. The truth is that nobody knows for sure.

My understand of SGX reason for suspension is that the market for the trio was not fully informed - i.e. some people know more information about others relating to the 3 stocks. In situation like this when you feel that some players have an undisclosed advantage in the market, do you suspend (i.e. stop allowing the advantage) or designate (i.e. continue to allow the advantage with some trading restrictions)?

[specuvestor]

Trading restrictions, in our experience over the years, will not crash a stock like that. We have gone through many rounds of broker induced trading curbs to know that Even in the SESDAQ crash stocks dont collapse 90%, or even the previous related IPCO debacle. So I'm not trying to be funny forecasting something that we can never ascertian

Loss of confidence and a "run" creating a vicious cycle, for eg short sellers report and of course suspension, is far worse.