SGX clarification is a response to brokers' fears over error trades
By Yang Huiwen
THE Singapore Exchange (SGX) has responded to intense broker objections by pointing out that traders who commit error trades and inadvertently fall foul of new 'naked' short-selling rules can appeal.
Broking houses had been worried about incurring fines of at least $1,000 for mistakes made in share transactions, following new rules this week.
Some of these error trades would by definition have been considered a naked short-sell, whereby a trader sells a stock he does not already own, or has not borrowed, in the hope the price will fall.
But lobbying from brokers, including a petition calling for a rethink, led to an SGX clarification yesterday, in which it assured the industry that it did not intend to use an atomic bomb to kill an ant.
Defaulting broking firms will have to appeal in writing to the head of enforcement within three days of being notified of the fine, the SGX said.
Brokerages will have to submit supporting documents to prove the transaction was a genuine error trade and not made deliberately to short-sell the stock. They will also have to state the basis for appeal and recommendation.
Once the appeal is lodged, the penalty will be temporarily waived until the ruling, which will come one to 10 working days later.
The SGX will assess appeals on a case-by-case basis.
For example, a trader who already owns shares under a Central Provident Fund (CPF) account but who wrongfully sells them under a non-CPF-linked trading account will be committing a naked short-sell.
Under such circumstances, he can appeal by submitting his CPF statement showing he owns the shares.
However, if a broking house is found liable for a failed trade, it must pay the penalty within five working days or face sanctions.
The SGX clarification comes a day after a meeting with various broking firms, which took issue with the harsh penalties they could incur for common trading mistakes. About 130 dealers at Kim Eng signed a petition to urge the SGX to reverse the policy.
'The Securities Association of Singapore (SAS) had a meeting with the SGX and we told them the penalties were rather harsh, and at the minimum they should have an appeals process,' said SAS chief executive Lim Eng Hai.
The SAS submitted a list of about eight considerations that the SGX should consider for appeal, he added.
'It's a welcome revision. That's what we asked for and we're glad they were open to that, and happy to hear that they have come up with this mechanism,' Mr Lim said. 'It's good that they have provided a way out. From what I know, it was not provided for originally.'
The SGX maintains that the avenue for appeal already existed and applies for any penalty the exchange imposes. No fee will be charged for the appeal process.
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Traders can appeal against fines
SGX clarification is a response to brokers' fears over error trades
By Yang Huiwen
THE Singapore Exchange (SGX) has responded to intense broker objections by pointing out that traders who commit error trades and inadvertently fall foul of new 'naked' short-selling rules can appeal.
Broking houses had been worried about incurring fines of at least $1,000 for mistakes made in share transactions, following new rules this week.
Some of these error trades would by definition have been considered a naked short-sell, whereby a trader sells a stock he does not already own, or has not borrowed, in the hope the price will fall.
But lobbying from brokers, including a petition calling for a rethink, led to an SGX clarification yesterday, in which it assured the industry that it did not intend to use an atomic bomb to kill an ant.
Defaulting broking firms will have to appeal in writing to the head of enforcement within three days of being notified of the fine, the SGX said.
Brokerages will have to submit supporting documents to prove the transaction was a genuine error trade and not made deliberately to short-sell the stock. They will also have to state the basis for appeal and recommendation.
Once the appeal is lodged, the penalty will be temporarily waived until the ruling, which will come one to 10 working days later.
The SGX will assess appeals on a case-by-case basis.
For example, a trader who already owns shares under a Central Provident Fund (CPF) account but who wrongfully sells them under a non-CPF-linked trading account will be committing a naked short-sell.
Under such circumstances, he can appeal by submitting his CPF statement showing he owns the shares.
However, if a broking house is found liable for a failed trade, it must pay the penalty within five working days or face sanctions.
The SGX clarification comes a day after a meeting with various broking firms, which took issue with the harsh penalties they could incur for common trading mistakes. About 130 dealers at Kim Eng signed a petition to urge the SGX to reverse the policy.
'The Securities Association of Singapore (SAS) had a meeting with the SGX and we told them the penalties were rather harsh, and at the minimum they should have an appeals process,' said SAS chief executive Lim Eng Hai.
The SAS submitted a list of about eight considerations that the SGX should consider for appeal, he added.
'It's a welcome revision. That's what we asked for and we're glad they were open to that, and happy to hear that they have come up with this mechanism,' Mr Lim said. 'It's good that they have provided a way out. From what I know, it was not provided for originally.'
The SGX maintains that the avenue for appeal already existed and applies for any penalty the exchange imposes. No fee will be charged for the appeal process.
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