Chapter 13 — Trading Practices and Conduct
13.1 Acting as Principal
If a Trading Member or its Trading Representative wants to trade as principal with a customer who is not a holder of a Capital Markets Services Licence, the customer must first be informed.
This Rule shall apply only to a Trading Member that holds a Capital Markets Services Licence. Any contract note relating to the above transaction must show that the Trading Member or Trading Representative acted as principal.
13.2 Acting as Agent
When acting as agent, a Trading Member and its Trading Representative must:(1) carry out the customer's instructions;(2) exercise skill, care and diligence;(3) act in good faith;(4) act in the best interests of customers, and comply with any obligation for best execution as set out in applicable laws and regulations;(5) if asked, disclose all circumstances and risks that could reasonably be expected to affect a customer's decision;(6) if asked, inform the customer of the current best bid and offer prices on the Trading System;(7) disclose the commission and any benefit directly or indirectly receivable on the transaction;(8) not enter into a transaction which may conflict with a duty owed to the customer, unless the customer is informed of the conflict and consents to the transaction; and(9) not disclose a customer's order unless:—(a) the prior written consent of the customer for the disclosure of the information is obtained;(b) the disclosure is for the effective execution of the customer's order;(c) the disclosure is necessary for the operations and risk management of the Trading Member if these functions have been outsourced by the Trading Member; or(d) the disclosure is required under the law or under the Rules.
A Trading Member must ensure that a person to whom it discloses a customer's order under Rules 13.2.1(9)(b) and (c) maintains confidentiality of such information.
13.3 Separation of Customer and Proprietary Trading Activities
A Trading Member must have procedures to prevent any conflict of interest between its customer trading activities and proprietary trading activities.
13.4 Customer Orders — Precedence
A Trading Member or a Trading Representative must not deal in securities or trade in futures contracts for his or her own account or for a Prescribed Person's account if the Trading Representative has an unexecuted order on the same terms from a customer. However, this Rule does not apply if:—(1) the Trading Member or the Trading Representative does not have access to customer's order flow information while executing for his or her own account or for the Prescribed Person's account;(2) the customer has prescribed that the order be executed under specified conditions and the Trading Member or Trading Representative is unable to execute the customer's order by reason of those conditions; or(3) the transaction is entered into in prescribed circumstances.
Refer to Practice Note 13.4.1.
In this Rule, "Prescribed Person" means:—(1) the Trading Representative's Trading Member;(2) a Director of the Trading Member;(3) an Employee or a Trading Representative of the Trading Member;(4) a person, a group of persons, a Corporation or a group of Corporations, or family trusts, whom the Trading Member, Director, employee or Trading Representative of the Trading Member is associated with or connected to.
13.5 Arrangement with Customers
A Trading Member or its Trading Representative must not:—(1) accept a share in the profits of a customer's account carried on the books of the Trading Member or have any arrangement with a customer to share in the profits of that account;(2) have any arrangement with a third party to allocate profits or losses to a customer's account carried on the books of the Trading Member; or(3) lead a customer to believe that the customer will not suffer loss as a result of opening an account or dealings.
13.5A Margin Management for Trading Members In Respect of Any Margins from Customers
Where the Trading Member collects margins from the customer in connection with trades executed on SGX-ST, regardless of whether it is required to under the Rules, the following shall apply:(1) subject to Rule 19.10.5, nothing in these Rules prohibits a Trading Member from imposing margin requirements, hair-cut rates, payment periods for customers to deposit collateral, valuations of positions and collateral, and making calls for additional margins, as it sees fit;(2) if a Trading Member is unable to contact a customer to call for margins, a written notice sent to the customer at the most recent address furnished by the customer to the Trading Member shall be deemed sufficient; and(3) where a customer fails to meet such margin that the Trading Member may call from the customer, the Trading Member may take actions as it deems appropriate, without giving notice to the customer, to reduce its exposures to the customer. Such actions may include liquidating all or such part of the customer's collateral deposited with the Trading Member, or taking action to offset all or such part of the customer's positions. SGX-ST may also order such Trading Member to immediately to take such action to offset all or such part of the positions of the customer to rectify the deficiency.
13.6 Unauthorised Trading
A Trading Representative must not:—(1) execute his personal trades in the account of a customer; and(2) use a customer's account for third party trading without the customer's prior written authorisation.
13.7 Excessive Trading
A Trading Member or a Trading Representative, when acting as agent, must not encourage transactions if the sole object is generating commission.
13.8 Market Manipulation and False Market
A Trading Member or a Trading Representative must not engage in, or knowingly act with any other person in, any act or practice that will or is likely to:—(1) create a false or misleading appearance of active trading in any securities or futures contracts; or(2) lead to a false market in respect of any securities or futures contracts. For avoidance of doubt, a false market includes a market in which:—(a) information is false, exaggerated or tendentious;(b) contrived factors are in evidence, such as buyers and sellers acting in collaboration to bring about artificial market prices; or(c) manipulative or fictitious orders, transactions or other devices have been employed.
Refer to Practice Note 13.8.1.
The following factors are relevant when considering whether an act or practice may breach Rule 13.8.1:—(1) whether the proposed transaction will be inconsistent with the history of, or recent trading in, the security or futures contract;(2) whether the proposed transaction will or may cause or contribute to a material change in the market for or the price of the security or futures contract, and whether the person involved or another person with whom the first person is collaborating may directly or indirectly benefit from alterations in the market or price;(3) whether the proposed transaction involves the placing of multiple buy and sell orders at various prices higher or lower than the market price, or the placing of buy and sell orders which give the appearance of increased volume;(4) whether the proposed transaction will coincide with or is likely to influence the calculation of reference prices, settlement prices and valuations;(5) whether parties involved in the proposed transaction are connected;(6) whether the buy and sell orders are to be entered at about the same time, for about the same price and quantity (excluding Direct Business);(7) whether the proposed transaction will or may cause the price of the security or futures contract to increase or decrease, but following which the price is likely to immediately return to about its previous level;(8) whether a proposed bid (offer) is higher (lower) than the previous bid (offer) but is to be removed from the market before it is executed;(9) whether the volume or size of the proposed transaction is excessive relative to reasonable expectations of the depth and liquidity of the market at the time;(10) whether the proposed buy (sell) order is likely to trade with the entire best offer (bid) volume and part of the offer (bid) at the next price level;(11) whether the proposed buy (sell) order forms part of a series of orders that successively and consistently increase (decrease) the price of the security or futures contract; and(12) whether there appears to be a legitimate commercial reason for the proposed transaction.
Refer to Practice Note 13.8.1.
A Trading Member or a Trading Representative must not enter a buy order or a sell order on the Trading System if there is an existing opposite order from that same Trading Member or Trading Representative in the same security or futures contract for the same price. This Rule does not apply if:—(1) the Trading Member or Trading Representative knows or ought reasonably knows that the orders are for different beneficial owners;(2) the order is a type expressly permitted in a practice note published from time to time by SGX-ST as having a legitimate commercial reason and which is unlikely to create a false market; or(3) the Trading Member or Trading Representative can otherwise establish that the purpose for which the order was made was not to create a false market.
Refer to Practice Note 13.8.1.
A Trading Member or a Trading Representative must not directly or indirectly deal in securities which involve no change of beneficial ownership as defined in Section 197(5) of the Securities and Futures Act, or knowingly execute, or hold himself out as having executed, an order for the bona fide purchase or sale of futures contracts without having effected a bona fide purchase or sale of futures contracts as defined in Section 207(1) of the Securities and Futures Act. It is a defence if the Trading Member or Trading Representative can show that it, or he or she had no reason to suspect, or no reasonable Trading Member or Trading Representative ought to have suspected or known, that the transaction was a wash sale.
A Trading Member or a Trading Representative must not deal in securities or trade in futures contracts in a manner that will or may affect or maintain the price of the securities, futures contract or their underlying, with intent to induce other persons to subscribe for, buy or sell the securities or futures contracts. This Rule does not apply to stabilising action carried out in accordance with Regulation 3 of the Securities and Futures (Market Conduct) (Exemptions) Regulations.
A Trading Member or a Trading Representative must not disseminate information that is false or misleading if the Trading Member or Trading Representative:(1) knows or ought reasonably knows that the information was false or misleading; or(2) is reckless about the truth of the information.
A Trading Member or a Trading Representative must not participate in any prohibited market conduct in securities or futures contracts or in any insider trading, or knowingly assist a person in such conduct.
A Trading Member or a Trading Representative must immediately inform SGX-ST if it or he or she reasonably suspects, or knows of, any attempted market manipulation, creation of a false market or insider trading.
13.9 Record of Orders
A Trading Member or a Trading Representative must ensure that a daily record of orders received from customers is maintained. The record must show the identity of the Trading Representative, account identification of each customer, the specific order, date and the time the order was received, transmitted, amended, and executed or cancelled. For avoidance of doubt, the record may be kept in the order management system.
A Trading Member must have a robust system to prevent tampering of the audit trail of orders entered into the Trading System.
13.10 Order Entry Person
A Trading Member may appoint a person to enter orders on the Trading System on instructions given by a Trading Representative or team of Trading Representatives. A Trading Member must ensure that a Trading Representative is supported by no more than 1 order entry person. For avoidance of doubt, an order entry person who supports a Remisier must be appointed by a Trading Member.
A Trading Member must ensure that the order entry person does not:—(1) deal in securities or trade in futures contracts;(2) exercise any discretion over the entry of orders;(3) give investment advice or make recommendations to customers;(4) accept instructions from customers;(5) communicate with customers regarding settlement; or(6) collect cash, cheques or share certificates on behalf of the Trading Member, designated Trading Representative(s) or customers.
A Trading Member must provide SGX-ST with the name and identity card/passport number of the order entry persons appointed.
A Trading Member must inform SGX-ST in writing if an order entry person ceases to act. If possible, at least 7 days prior notice should be given.
13.11 Responsibility for Orders
A Trading Member is responsible for the accuracy of all orders entered into the Trading System by its Trading Representatives and any order entry person.
A Trading Representative is responsible for the accuracy of orders entered into the Trading System by or on behalf of the Trading Representative.
Orders must be entered in accordance with any procedures SGX-ST prescribes.
13.12 Identification and Password
A Trading Representative must have a unique identification number of not more than 3 characters and password to enter orders into the Trading System and must maintain confidentiality of the identification number and password.
13.13 Off Premises Broking
Before allowing its Trading Representatives to carry out dealing activities outside its office premises, a Trading Member must inform SGX-ST.
A Trading Member must inform all customers that Trading Representatives are operating away from its office premises and of any resulting limitations that might affect customer service and get written acknowledgement.
A Trading Member must ensure its Trading Representatives do not misuse customers' accounts for third party trading. In this regard, contract notes and statements must be sent to the customer's residential address, and not to "care-of" address, "PO Box" address or the Trading Representative's address. However, if the customer chooses otherwise, the Trading Member must explain the risk of unauthorised trading to the customer, get written acknowledgement, and monitor the trading activities for any unauthorised trading in customers' accounts.
Rules 13.13.1 to 13.13.3 shall apply only to a Trading Member that holds a Capital Markets Services Licence. A Trading Member that holds a licence specified in Rule 4.1.1(1)(b) shall comply with such requirements established by the Relevant Regulatory Authority, if any, and principles of good business practice in relation to carrying out dealing activities outside its office premises.