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MAS, SGX propose reforms to curb speculative trading

Measures target contra trades and short-selling, among others

Published on Feb 8, 2014 6:47 AM
 
A man walks past the Singapore Exchange building at Shenton Way. Share trading in Singapore could be headed for some major changes in the wake of last October's penny stock crash if new proposals by regulators go ahead. -- ST FILE PHOTO: KUA CHEE SIONG

Share trading in Singapore could be headed for some major changes in the wake of last October's penny stock crash if new proposals by regulators go ahead.

It could curb the speculative nature of so-called "contra trading", a practice unique to Singapore and Malaysia.

This involves traders buying shares without cash upfront and reselling them within three days, pocketing or paying up the profit or loss rather than the full sum.

Critics say this practice encourages highly speculative trading. Contra trading formed 31 per cent of local market turnover.

 
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Background story

Some of the proposals

  • Brokerages to require clients to put up collateral of at least 5 per cent on any unsettled purchases;
  • Settlement period to be cut from transaction plus three days (T+3) to T+2 days by 2016;
  • A minimum trading price of, say, 10 cents to 20 cents for mainboard-listed firms;
  • Introduce "short-selling" reporting requirements;
  • Brokerages to announce on the SGX website any trading curbs they impose on trading of a listed firm's shares;
  • SGX will publish a "trade with caution" announcement when a listed firm is unable to explain unusual trading activities when it is queried.