$500 review fees; need to report errors within 30mins
By ANGELA TAN 20 December 2008
In an attempt to encourage trading discipline, the Singapore Exchange (SGX) yesterday said that effective from Jan 2 next year, it would only review error trades involving losses of at least $5,000 and for a review fee of $500.
The exchange also said that all error trades must be reported to the SGX within 30 minutes of occurrence.
‘The revised policy seeks to enhance trade certainty, as well as timeliness and transparency in the resolution of error trades,’ the SGX said in a statement.
BT understands that there are less than four reported error trades a year. But in reality, there could be more as they are often settled privately without the SGX’s intervention.
For error trades that trading members wish to have reviewed, they must be referred to SGX within 60 minutes of occurrence, or before 6pm that trading day, whichever is earlier.
The latest policy decision follows the public consultation paper that the SGX issued on June 21 last year, seeking feedback on proposed changes involving error trades.
Currently, the SGX does not impose any review fees or time limits for reporting error trades.
Its rules just require the erring party to seek the agreement of the counterparty to cancel an error trade. Both parties are under an obligation to report the error within the same day.
Under the new rules, the definition of an error trade has also been widened to encompass transactions as a result of an error in the entry of volume and ‘where SGX deems the transaction to be an error trade’. Currently, it only refers to deals done as a result of an error in the entry of bid/ask.
In its latest move, the SGX also introduced a no-tolerance range for error trades involving structured products. This means that error trades done within the no-tolerance range will stand.
The no-tolerance range will be determined as the wider of +/- 20 minimum bid sizes from a pre-determined reference price of the structured product, or +/- 25 per cent of the reference price.
When contacted by BT, Albert Fong, president of The Society of Remisiers (Singapore) felt that the 30-minute time imposition to report the error trade to the SGX is ‘unnecessary and impractical’.
‘I hope in practice, there will be some flexibility,’ he said.
‘The proposed 30 minutes time limit is hardly adequate to include the time taken for the erring member firm to seek agreement of the counterparty to cancel an error trade. Besides, member firms need some time to investigate and trace the remisiers or the Internet clients involved. It is in the interest of the erring member firm and trader to ensure expeditious cancellation of an error trade with due care and diligence. Hence, we believe a reasonable time limit would largely depend on a case-by-case situation and should not be firmly fixed,’ he said.
He cited an example of Internet trading, where parties are unknown, unlike the traditional and more clear-cut straight-through transactions via brokers.
Mr Fong cited another example of covered warrants, where genuine errors are made simply because the codes often look similar. ‘The SGX should consider a clear and distinctive indication of warrant codes, among a sea of similar warrants issued by various issuers; not a fine,’ he said.
While the SGX has substantially cut the review cost from its originally proposed $2,000, the $500 review cost did not go down well either.
‘Whether $2,000 or $500, these fines add to our costs. It doesn’t help that commissions have fallen since the industry liberalised years ago. Even with Internet trading, we still incur operating costs,’ Mr Fong explained.
BT understands that the fines collected by the SGX does not go into the exchange’s profit and loss account but into an investor education fund.
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New Error-Trade Rules to Boost Trading Discipline
$500 review fees; need to report errors within 30mins
By ANGELA TAN
20 December 2008
In an attempt to encourage trading discipline, the Singapore Exchange (SGX) yesterday said that effective from Jan 2 next year, it would only review error trades involving losses of at least $5,000 and for a review fee of $500.
The exchange also said that all error trades must be reported to the SGX within 30 minutes of occurrence.
‘The revised policy seeks to enhance trade certainty, as well as timeliness and transparency in the resolution of error trades,’ the SGX said in a statement.
BT understands that there are less than four reported error trades a year. But in reality, there could be more as they are often settled privately without the SGX’s intervention.
For error trades that trading members wish to have reviewed, they must be referred to SGX within 60 minutes of occurrence, or before 6pm that trading day, whichever is earlier.
The latest policy decision follows the public consultation paper that the SGX issued on June 21 last year, seeking feedback on proposed changes involving error trades.
Currently, the SGX does not impose any review fees or time limits for reporting error trades.
Its rules just require the erring party to seek the agreement of the counterparty to cancel an error trade. Both parties are under an obligation to report the error within the same day.
Under the new rules, the definition of an error trade has also been widened to encompass transactions as a result of an error in the entry of volume and ‘where SGX deems the transaction to be an error trade’. Currently, it only refers to deals done as a result of an error in the entry of bid/ask.
In its latest move, the SGX also introduced a no-tolerance range for error trades involving structured products. This means that error trades done within the no-tolerance range will stand.
The no-tolerance range will be determined as the wider of +/- 20 minimum bid sizes from a pre-determined reference price of the structured product, or +/- 25 per cent of the reference price.
When contacted by BT, Albert Fong, president of The Society of Remisiers (Singapore) felt that the 30-minute time imposition to report the error trade to the SGX is ‘unnecessary and impractical’.
‘I hope in practice, there will be some flexibility,’ he said.
‘The proposed 30 minutes time limit is hardly adequate to include the time taken for the erring member firm to seek agreement of the counterparty to cancel an error trade. Besides, member firms need some time to investigate and trace the remisiers or the Internet clients involved. It is in the interest of the erring member firm and trader to ensure expeditious cancellation of an error trade with due care and diligence. Hence, we believe a reasonable time limit would largely depend on a case-by-case situation and should not be firmly fixed,’ he said.
He cited an example of Internet trading, where parties are unknown, unlike the traditional and more clear-cut straight-through transactions via brokers.
Mr Fong cited another example of covered warrants, where genuine errors are made simply because the codes often look similar. ‘The SGX should consider a clear and distinctive indication of warrant codes, among a sea of similar warrants issued by various issuers; not a fine,’ he said.
While the SGX has substantially cut the review cost from its originally proposed $2,000, the $500 review cost did not go down well either.
‘Whether $2,000 or $500, these fines add to our costs. It doesn’t help that commissions have fallen since the industry liberalised years ago. Even with Internet trading, we still incur operating costs,’ Mr Fong explained.
BT understands that the fines collected by the SGX does not go into the exchange’s profit and loss account but into an investor education fund.
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