MAS and SGX to strengthen the securities market in Singapore

Nurdianah Md Nur

The Monetary Authority of Singapore (MAS) and Singapore Exchange (SGX)  recently released a joint consultation paper setting out proposals to strengthen the securities market in the republic.

According to a review by MAS and SGX, even though the securities market in Singapore remains sounds, there are three areas for improvement. These areas include promoting orderly trading and responsible investing; improving the transparency of market intervention measures; and strengthening the process for admitting new listings and enforcing against listing rule breaches.    

Promoting orderly trading and responsible investing
According to MAS and SGX, low-price securities are generally associated with high volatility, which makes them more susceptible to speculation and potential market manipulation. To counter this, MAS and SGX are considering the possibility of introducing a minimum trading price for issuers listed on the SGX Mainboard. However, views from the industry and the public will be considered before MAS and SGX decide to implement this.

As for contra trading, MAS and SGX have concluded that the focus should be on reducing the credit risk exposures of market participants. It is thus proposed that securities intermediaries impose minimum collateral on their customers for trading in both SGX-listed and foreign listed securities, based on the customers' open positions and credit risk management practices. SGX also intends to shorten the settlement cycle from three to two days by 2016.

Recognising the role of short selling in the price discovery process, MAS and SGX propose a short position reporting regime to further enhance transparency in short selling. There will be two options under the short position reporting regime: aggregate position reporting and disclosure of significant individual short positions. Prior to the deployment of this regime, MAS and SGX will seek feedback on the pros and cons of each option as well as the type of information that would be made public.

Improving the transparency of market intervention measures
As trading restrictions by intermediaries can impact the market, it is important to ensure fair and transparent dissemination of information on such restrictions. MAS and SGX thus propose that trading restrictions imposed by securities intermediaries for securities listed on SGX to be announced through the SGX website.

Strengthening the process for admitting new listings and enforcing against listing rule breaches
To address perceived and actual conflicts of interests in relation to SGX's role as the listing authority, MAS and SGX plan to establish an independent Listings Advisory Committee. The Committee will consider listing policy issues and listing applications that meet specified referral criteria. This will supplement SGX's existing listing review process and introduce practitioner experience to the decision-making process.

MAS and SGX also plans to establish an independent Listings Disciplinary Committee and Listing Appeals Committee. It is hoped that these committees will help improve the transparency of SGX's disciplinary process and ensure fair administration of sanctions for listing-related matters. MAS and SGX also propose expanding the range of regulatory sanctions for listing rule breaches to include powers to impose fines, restrict the activities that issuers may undertake, and to make offers of compositions for minor and technical breaches.  

The consultation period for these proposals has been set for 12 weeks. Interested parties are invited to submit their views on comments on the proposals by 2 May 2014.