I REFER to the report ‘SGX deters naked shorts with disclosure measures’ (BT, Sept 23).
It is clear that the Singapore Exchange (SGX) is looking into curbing naked short-selling to remove its negative impact on the stock market. Unfortunately, by imposing an additional minimum of $1,000 fine on such short-sellers, it is indirectly creating another problem.
While SGX penalises the wilful shorters, it also nets in the forgetful traders at the same time. How could the average man-in-the-street be slapped with a fine of $1,000 for just overselling his shares by mistake?
And with a $50,000 punishment for overselling in the buying-in market, few remisiers would accept a buying-in assignment for their clients, considering the risks.
It is controversial that the SGX will review these measures after a month while the penalty begins tomorrow. What is to become of those who would be already being heavily punished, after SGX discovers one month later that the penalty system needs a complete revamp?
Next is the issue of significance. Is an oversold position amounting to $5,000 by an average client of any ‘materiality’ in terms of suppressing the market price of a share counter as compared to other short-selling positions that are in the millions? Should we not introduce a minimum contract size before we impose a hefty fine?
If the Central Depository (of the Singapore Exchange) is sincere about protecting the investing public from being unfairly penalised, it could perhaps link all CDP Security Account balances to the trading system, so that if someone sells shares beyond what he possesses, the transaction would be outright rejected. The same goes for scrip borrowings, to allow the greenlight. Is the SGX willing to spend on such an improvement?
Alternatively, the $1,000 fine may be slapped on clients only when they naked-short twice within the same running month.
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LETTER TO THE EDITOR
Naked Short Fine Will Create New Problem
I REFER to the report ‘SGX deters naked shorts with disclosure measures’ (BT, Sept 23).
It is clear that the Singapore Exchange (SGX) is looking into curbing naked short-selling to remove its negative impact on the stock market. Unfortunately, by imposing an additional minimum of $1,000 fine on such short-sellers, it is indirectly creating another problem.
While SGX penalises the wilful shorters, it also nets in the forgetful traders at the same time. How could the average man-in-the-street be slapped with a fine of $1,000 for just overselling his shares by mistake?
And with a $50,000 punishment for overselling in the buying-in market, few remisiers would accept a buying-in assignment for their clients, considering the risks.
It is controversial that the SGX will review these measures after a month while the penalty begins tomorrow. What is to become of those who would be already being heavily punished, after SGX discovers one month later that the penalty system needs a complete revamp?
Next is the issue of significance. Is an oversold position amounting to $5,000 by an average client of any ‘materiality’ in terms of suppressing the market price of a share counter as compared to other short-selling positions that are in the millions? Should we not introduce a minimum contract size before we impose a hefty fine?
If the Central Depository (of the Singapore Exchange) is sincere about protecting the investing public from being unfairly penalised, it could perhaps link all CDP Security Account balances to the trading system, so that if someone sells shares beyond what he possesses, the transaction would be outright rejected. The same goes for scrip borrowings, to allow the greenlight. Is the SGX willing to spend on such an improvement?
Alternatively, the $1,000 fine may be slapped on clients only when they naked-short twice within the same running month.
Jimmy Ho Kwok Hoong
Remisier
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