ASEAN KEY DESTINATIONS
Investors to report short positions on SGX stocks from October
SINGAPORE: Singapore's central bank said on Monday (May 28) it will require investors to report short positions and short sell orders in securities listed on the Singapore Exchange from Oct 1 to improve transparency on such activities.
Under the new rules, investors with short positions above the threshold of the lower of 0.2 per cent of total issued shares or S$2 million will have to report the positions to the Monetary Authority of Singapore (MAS).
MAS said the rule will improve transparency on short selling activities in the market and enable investors to make more informed trading decisions.
MAS will publish aggregated short positions of each security on Wednesday of each week.
The rule was proposed initially in 2016 amid a growing number of public short-selling campaigns against listed companies in the region.
Short selling involves the sale of a security that the seller does not own, or has borrowed, believing that the security's price will decline so that it can be profitably bought back at a lower price.
Mr Jimmy Zhu, chief strategist at brokerage firm Fullerton Markets, said he viewed the move as a means to maintain stability in the financial markets.
“Such moves from MAS may serve to avoid some unnecessary volatility driven by irrational speculators … We may see possible jitters in the second half of the year when the US Federal Reserve keeps its tightening bias.”
Mr Zhu added that he did not think the new rules would have significant implications on investors and brokers.
“Take for example, when China took some measures to stablise the forex market a few years ago, the underlying trend did not seem to change.
"Over the long run, the trend of the benchmark Straits Times Index will still follow key regional markets and US stocks. Plus, short selling isn’t cheap in Singapore compared to other markets.”
MAS said the new rules will also provide “statutory backing” to SGX’s trading rules, which already require securities brokers and banks to flag all investor short sell orders to the exchange.
There will be no changes to the current arrangement for investors to inform their brokers when they submit short sell orders. The local bourse will continue to consolidate the short sell orders of each security and publish the information daily.
However, Mr Jimmy Ho, president of the Society of Remisiers, said the new move could prove “disruptive” to remisiers.
“They cannot be on their toes to do this while trading because it’s very interruptive. If there is a need to report any short position, can do so after market closure, let’s say maybe within a 1-hour timeframe, rather than doing it intraday. Maybe there can be a link between the reporting system by MAS and SGX so there is no need for doing double work.”
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