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Singapore Exchange introduces new transparency requirements to deter failed share delivery

The Singapore Exchange has announced that although trading in its listed securities has been orderly and settlement has been timely despite the current market turbulence, it is implementing additional measures to enhance transparency in the market and deter failed deliveries.

The exchange says information about naked short positions that result in failure of delivery would be useful to market participants, while 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 that results in failed delivery to the CDP clearing system are closed out by buying-in from the market, which takes place from 11.30 a.m. daily. The exchange will now publish the list of buying-in securities and the volume of shares sought at 11 a.m. every day via SGXNET and the SGX website.

The exchange says this method of disseminating information is more efficient than the present practice of having the information relayed through brokers that participate in the buying-in market. After completion of buying-in, the exchange will publish the list of securities bought-in (including individual counters), volume and dollar value at 8.30 a.m. the following business day.

In addition to the current processing fee for buying-in of SGD30 per contract, there will be a penalty of 5 per cent of the value of the failed trade, subject to a minimum of SGD1,000 for trades executed from September 25 onward. The fee will be reviewed periodically to assess its effectiveness.

Market participants are not allowed to sell short in the buying-in market, the exchange says, 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 SGD50,000 and/or disbarment from participation in the market, also as of September 25. The measures will be reviewed after a month.

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