Past version: Effective from 01 Oct 2018 to 09 Dec 2018
| Issue Date | Cross Reference | Enquiries |
| Added on 11 March 201311 March 2013, amended on 15 September 201715 September 2017 and 1 October 20181 October 2018. | Rule 8A.1 – 8A.6 | Please contact Member Supervision: Facsimile No : 6538 8273 E-Mail Address: membersup@sgx.com |
1. INTRODUCTION
1.1 Rule 8A.3.1 requires each sell order for Specified Capital Markets Products to be marked to indicate to SGX-ST whether it is a Short Sell Order or a normal sell order. The quantity, volume or value of the Specified Capital Markets Product in which a person intends to make or is making a Short Sell Order shall also be indicated.
1.2 Rule 8A.3.1A states that a Trading Member and its Trading Representative shall not enter a sell order in the Trading System if a customer has not indicated whether the sell order is a Short Sell Order or a normal sell order and/or has not provided the information relating to the quantity, volume or value of the Specified Capital Markets Product in which the customer intends to make or is making a Short Sell Order.
1.3 Rule 8A.1.1 defines a "Short Sell Order" as any order to sell any Specified Capital Markets Product where the person who makes the order does not, at the time of the order, have an interest in the Specified Capital Markets Product as specified under section 137ZH of the Securities and Futures Act.
1.4 Rule 8A.3.3 requires a Trading Member to implement the necessary procedures and systems to facilitate compliance with the obligations set out in Rule 8A.3.1.
1.5 Rule 8A.4.2 states that SGX-ST may, at its discretion, waive the requirement to mark sell orders for specific classes of market participants.
1.6 Rule 8A.6.1 states that a Trading Member may submit a report of erroneously marked sell orders through such facility that is provided by SGX-ST and shall ensure that the report:
(a) adheres to the requirements for submission established by SGX-ST; and
(b) is complete and accurate.
1.7 This Practice Note further sets out a Trading Member's obligations pursuant to Rule 8A.3.1, 8A.3.3, and 8A.6.
1.8 SGX-ST will publish the short sale information collected in this manner before the start of each Market Day. Greater transparency to the market of short selling activities can be beneficial, by providing more timely information to better look after investors' interests, and to reduce the risk of manipulative or other unfair trading practices.
2. MARKING OF SELL ORDERS
2.1 The marking of sell orders should be viewed as part of information required for order entry.
2.2 Trading Members who are concerned about confidentiality of clients' order information should include in their client agreement that trading activities are subject to short selling requirements that are prescribed by SGX-ST and the Authority.
2.3 Trading Members should have in place the following measures to be in compliance with Rule 8A.3.3:
(a) Sell orders received through voice broking
Clear procedures should be in place to require Trading Representatives to ask a customer whether a sell order is a Short Sell Order or a normal sell order. Procedures should also be in place to ensure that the Trading Representative or the dealing assistant correctly enters the sell order into the Trading System. The Trading Member is not required to put in place voice recording facilities beyond its existing practices.
Clear procedures should be in place to require Trading Representatives to ask a customer whether a sell order is a Short Sell Order or a normal sell order. Procedures should also be in place to ensure that the Trading Representative or the dealing assistant correctly enters the sell order into the Trading System. The Trading Member is not required to put in place voice recording facilities beyond its existing practices.
(b) Sell orders entered through order management systems (including Internet Trading platforms)
The trading interface should require the customer to indicate whether a sell order is a Short Sell Order or a normal sell order at the point of order entry. It should also ensure that a sell order cannot be transmitted to the Trading System if it is not marked either as a Short Sell Order or a normal sell order.
The trading interface should require the customer to indicate whether a sell order is a Short Sell Order or a normal sell order at the point of order entry. It should also ensure that a sell order cannot be transmitted to the Trading System if it is not marked either as a Short Sell Order or a normal sell order.
(c) Sell orders entered by customers with Sponsored Access
A Trading Member must ensure that all customers with Sponsored Access to the Trading System ("Sponsored Customers") can fulfil the requirements of Rule 8A.3.3. A Trading Member must ensure that all Sponsored Customers have the necessary operational and technical systems and procedures in place:
A Trading Member must ensure that all customers with Sponsored Access to the Trading System ("Sponsored Customers") can fulfil the requirements of Rule 8A.3.3. A Trading Member must ensure that all Sponsored Customers have the necessary operational and technical systems and procedures in place:
(i) to enable sell orders to be marked as a Short Sell Order or a normal sell order at the point of order entry in the customer's order management system; and
(ii) to ensure that a sell order cannot be transmitted to the Trading System if it is not marked either as a Short Sell Order or a normal sell order.
When determining whether the obligation on Trading Members set out in this paragraph 2.3(c) has been fulfilled by Trading Members, a relevant consideration for SGX-ST is whether the requirements on Sponsored Customers have been set out in legally enforceable documents.
(d) Record keeping
A Trading Member's daily record of orders received from customers, maintained in accordance with Rule 13.9, should show whether a sell order is a Short Sell Order or a normal sell order.
A Trading Member's daily record of orders received from customers, maintained in accordance with Rule 13.9, should show whether a sell order is a Short Sell Order or a normal sell order.
2.4 A Trading Member should also require each seller to split partial short orders, where he does not own the full quantity of securities to be sold, into two separate orders. One order is for the portion he owns (i.e., normal sell order) and the other for the portion that he does not (i.e., Short Sell Order).
2.5 It is the responsibility of the end-investor to ensure that the sell order is accurately marked. The Trading Member is not required to verify that the customer has marked his sell order correctly.
3. DEFINITION OF A SHORT SELL ORDER
3.1 A person shall be deemed to have an interest in a Specified Capital Market Product if the person is deemed to have an interest in the Specified Capital Markets Product under section 137ZH of the Securities and Futures Act. Some examples of interest in a Specified Capital Markets Product are set out below:
(a) An investor purchases the shares on T. He subsequently sells the same quantity of the shares two days later (i.e., on T+2) with settlement obligation accordingly due on T+5. On T+3, the shares that he purchases is credited into his depository account maintained with CDP. The order to sell the shares is a normal sell order.
(b) [deleted]
(c) An investor sells shares of Company A on T and his settlement obligations are accordingly due on T+3. On the same day (i.e., T), he recalls the shares, which he had lent under a securities lending agreement. Under the terms of the securities lending agreement, the borrower must return the shares by 12:00 hours on T+3. The order to sell the shares is a normal sell order.
Compliance with Rule 8A.3.1 under specific circumstances
3.2 SGX-ST wishes to clarify the treatment of sell orders under the following scenarios:
(a) A seller holds his shares in trust with an overseas custodian. In the ordinary course of business, the shares are available to CDP for settlement. An order to sell these shares is a normal sell order.
(b) A seller holds shares listed on an overseas exchange and held with an overseas custodian. An order to sell these shares on SGX-ST is a normal sell order if in the ordinary course of business, the shares are available to CDP for settlement. In order for the shares to be available to CDP for settlement, the shares must be in the seller's depository account, or if he is settling through a depository agent, his depository agent's sub-account maintained with CDP. The seller is required to instruct the overseas custodian to transfer the shares into the seller's depository account or his depository agent's sub-account maintained with CDP.
(c) A seller lends his shares but has a right of recall under the relevant securities borrowing and lending agreement. An order to sell these shares is a normal sell order if in the ordinary course of business where the seller recalls the shares, the shares are available to CDP for settlement. The seller is not required to recall the shares prior to placing the order.
(d) A lender liquidates the shares that a borrower had placed with him as collateral, due to the default of a borrower. An order to sell these shares is a normal sell order.
(e) A seller borrows the amount of shares being sold prior to placing the sell order. The seller is not deemed to have an interest in the shares under the Securities and Futures Act. Therefore, the sell order is a Short Sell Order.
(f) [deleted]
(g) A seller agrees to buy shares at the day's closing price or at a volume-weighted average pricing as part of his client facilitation activities and does not have any reason to believe that the agreement would not be fulfilled. Before the price is confirmed, he sells the shares. The sell order is a normal sell order.
3.3 The marking of sell orders should be based on what the investor knows about its positions at the time of order entry. An example is set out below:
(a) An investor holds 5,000 shares of Stock A. He puts in a sell order for 5,000 shares of Stock A. This is a normal sell order. He also puts in a buy order for 3,000 shares of Stock A.
(b) Subsequently he enters a sell order for 2,000 shares of Stock A. At the point where he enters the sell order, the buy order for 3,000 shares of Stock A has not been filled. The investor should mark this sell order as a Short Sell Order.
3.4 [deleted]
4. REPORTING OF ERRONEOUSLY MARKED SELL ORDERS
4.1 A Trading Member can submit a report electronically to correct short sell information that was marked at order entry, in accordance with the requirements for submission established by SGX-ST.
4.2 The requirement to report erroneously marked sell orders only extends to erroneously marked sell orders which have been executed. If an erroneously marked sell order has not been executed, there is no requirement to make an error report.
4.3 For purposes of error reporting, the customer has to determine whether his sell orders marked as Short Sell Orders are accurate in light of the actual short sales volume executed and his actual shareholding. For example, a customer thought he does not own any shares of a counter, and entered an order to short sell 8,000 shares. The customer later discovers that he actually owned 2,000 shares of the counter.
(a) In a case where the order is totally executed
The customer has actually short sold only 6,000 shares (8,000 executed minus 2,000 owned). He will have to report the erroneously marked Short Sell Order, stating the volume that was disclosed as short sold (8,000 shares) and the actual short sales volume (6,000 shares).
The customer has actually short sold only 6,000 shares (8,000 executed minus 2,000 owned). He will have to report the erroneously marked Short Sell Order, stating the volume that was disclosed as short sold (8,000 shares) and the actual short sales volume (6,000 shares).
(b) In a case where the order is partially filled (e.g., only 4,000 shares executed)
The customer has actually short sold only 2,000 shares (4,000 executed minus 2,000 owned). He will have to report the erroneously marked Short Sell Order, stating the volume that was disclosed as short sold and that was executed (4,000 shares) and the actual short sales volume (2,000 shares).
The customer has actually short sold only 2,000 shares (4,000 executed minus 2,000 owned). He will have to report the erroneously marked Short Sell Order, stating the volume that was disclosed as short sold and that was executed (4,000 shares) and the actual short sales volume (2,000 shares).
4.4 SGX-ST relies on the submissions of the Trading Members to publish an updated weekly aggregate report. Therefore, Trading Members must ensure that the report:
(a) adheres to the requirements for submission established by SGX-ST; and
(b) is complete and accurate.
4.5 A Trading Member is to ensure that the requisite fields in the report are completed in the correct format and the information communicated by their customers is accurately conveyed in the report. Reports that are not in the correct format, named incorrectly or have the securities name and code not correctly entered will not be processed.
4.6 SGX-ST may request for records of corrections to short sell information at the individual order level from Trading Members. Trading Members should retain this information in accordance with Rule 12.1.1.
4.7 The report can be submitted from the start of the trading day following the date of the sale to 17:45 hours on that day.
4.8 A Trading Member may wish to take note of the following matters on the submission of the report:
(a) A Trading Member should submit a single report for all Specified Capital Market Products that have been misreported. If the Trading Member wishes to update its report for the same Market Day, it should submit a revised report with the same file name before the deadline set out in paragraph 4.7.
(b) The transmission of the report will be via a designated Secured File Transfer Protocol ("SFTP") folder. Trading Members who do not have access to the designated SFTP folder should contact SGX-ST to apply for the requisite access.
(c) In the event that the SFTP is unavailable, SGX-ST will extend the submission period. Trading Members will be informed of the extended submission period by way of circular.
5. EXEMPTION FROM MARKING OF SELL ORDERS
5.1 SGX-ST may waive the requirement to mark sell orders for specific classes of market participants.
5.2 All persons exempted from section 137ZJ(1) of the Securities and Futures Act are, to the same extent and subject to the same conditions, exempted from Rule 8A.3.
5.3 [deleted]
5.4 [deleted]
5.5 [deleted]