The Singapore Exchange (SGX) has announced new initiatives to enhance existing transparency in the market and to deter failed deliveries of equities.
Despite current market turbulence and global financial uncertainties, the SGX stated on Monday that the trading of securities listed on the exchange has been orderly and settlement has been timely. However, it is of the view that information about naked short positions which result in failure of delivery to Central Depository (CDP) would be useful to market participants.
The SGX considers furthermore that cumulative short-selling of individual share securities without the discipline of borrowing to cover delivery obligations, may threaten the orderliness of the market with implications for the integrity of the clearing system.
In Singapore, naked short selling which results in failed delivery to CDP are closed-out by buying-in from the market. Buying-in takes place from 11.30am every day.
With immediate effect, SGX will publish the list of buying-in securities and the volume of shares sought, at 11am every day. Publication will be done via SGXNET and SGX websites. This will make the dissemination of information more efficient than the present practice of having the information relayed through brokers who participate in the buying-in market.
After completion of buying-in, SGX will publish the list of securities bought-in (which includes individual counters), the volume and dollar-value at 8:30 am the following business day.
In addition to the current processing fee for buying-in of $30 per contract, there will be a penalty of 5% of the value of the failed trade subject to a minimum of $1,000. This penalty will take effect for trades executed from Thursday September 25, 2008 onwards. The fee will be reviewed from time to time to assess its effectiveness.
Market participants have been told by the SGX not to short-sell in the buying-in market as it runs counter to the objective of buying-in. Accordingly, any failure to deliver shares in the buying-in market may be liable to a penalty of $50,000 and/or disbarment from participating in the buying-in market. This will take effect from Thursday, September 25, 2008.
These measures will be reviewed after a month. Meanwhile, the SGX stated that it "remains vigilant in maintaining the orderly functioning of the market and safe efficient clearing."
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