Introduction

The Monetary Authority of Singapore (MAS) and the Singapore Exchange (SGX) have released a joint consultation paper on 7 February 2014 which sets out proposals to strengthen the securities market in Singapore.

These proposals follow an extensive review conducted by MAS and SGX, and are open for public consultation until 2 May 2014. As part of the review, MAS and SGX have identified 3 key areas for possible enhancements, namely:

  • measures to promote orderly trading and responsible investing;
  • enhancements to improve transparency of market intervention measures; and
  • framework to strengthen the process for admitting new listings and enforcing against listing rule breaches.

Promoting Orderly Trading and Responsible Investing

  1. Minimum Trading Price – MAS and SGX are considering the setting of a minimum trading price as a continuing listing requirement for issuers listed on the SGX Mainboard, with the minimum trading price pegged to the issuer’s volume weighted average share price over a 180-day period. It has been suggested that the initial minimum trading price could be around S$0.10 toS$0.20. Under the consultation paper, the issuer will be given a reasonable period of time (e.g. 36 months) to comply with the minimum trading price requirement, failing which it may be delisted from the SGX Mainboard.
  2. Collateral Requirements for Securities Trading – MAS and SGX are proposing that securities intermediaries impose minimum collateral on their customers (of 5% of a customer’s open position) for trading in both SGX-listed and foreign listed securities, based on the customers’ open positions and credit risk management practices. It has been proposed that institutional investors be exempted from the aforementioned collateral requirements. The SGX also intends to shorten the settlement cycle from T+3 to T+2 days by 2016.
  3. Short Position Reporting Requirements –MAS and SGX are proposing a short position reporting regime that will complement the marking regime introduced by SGX last year. Under the proposed regime, there are 2 options being proposed, namely: (i) aggregate position reporting; and (ii) disclosure of significant individual short positions. Aggregate position reporting will require investors with net short positions that are the lower of 0.05% or S$100,000 of issued shares of a listed entity to report weekly, with the aggregated short positions published weekly without revealing investor identity, whereas public disclosure of short positions will require short position holders to report their net short positions by T+2 days, if their net short position exceeds 0.5% of issued shares, and for every subsequent change in position of 0.1% or more. Under the latter option, the identity of short positions holders and their net short positions will be published on an ongoing basis.

Transparency of Market Intervention Measures

To ensure fair and transparent dissemination of information on trading restrictions to investors, MAS and SGX are proposing for such trading restrictions imposed by securities intermediaries (in respect of securities listed on SGX) to be announced through the SGX website. The proposal is however not envisaged to apply to cases where a securities intermediary wants to impose specific control measures to manage its exposure to certain customers only.

Strengthening the Process for Admitting New Listings and Enforcing Against Listing Rule Breaches

  1. Reinforcing the SGX Listings Framework – To address actual and perceived conflicts of interests in relation to SGX’s role as the listing authority, MAS and SGX are proposing to establish an independent Listings Advisory Committee to consider listing policy issues and listing applications in respect of matters that: (i) present novel or unprecedented issues; (ii) require specialised expertise; or (iii) involve matters of public interest. This is proposed to supplement SGX’s existing listing review process, and introduce practitioner experience to the decision-making process.
  2. Strengthening Powers to Enforce Regulatory Actions against Listing Rule Breaches – To improve the transparency of SGX’s disciplinary process and ensure fair and independent administration of sanctions for listing-related matters, MAS and SGX are proposing to establish an independent Listings Disciplinary Committee and Listings Appeals Committee, with powers to impose a range of regulatory sanctions for listing rule breaches (including powers to impose fines and to restrict the activities that issuers may undertake). It is also being proposed that SGX be given the discretion to make offers of compositions for minor or technical breaches, as well as the ability to require remedial action for non-compliance by the issuers.