Chapter 5 Trading Practices and Conduct

5.1 Principal to other Trading Member

5.1.1

A Trading Member acts and contracts as principal with regard to the other Trading Member in each transaction it undertakes or reports to on SGX-ST.

Added on 3 June 2019 3 June 2019.

5.2.1

A Trading Member is bound by, and shall honour the terms of, each contract:

(a) entered by or through it on the Trading System; and

(b) entered into by it via Direct Business and reported to SGX-ST.

Added on 3 June 2019 3 June 2019.

5.2.2

A Trading Member agrees that each such contract is subject to the Rules and the Clearing Rules.

Added on 3 June 2019 3 June 2019.

5.3 Qualification by a Clearing Member

5.3.1

A Trading Member cannot execute any contracts on SGX-ST unless it is qualified by a Clearing Member or is itself admitted as a Clearing Member.

Added on 3 June 2019 3 June 2019.

5.3.2

A Trading Member must be qualified by no more than one Clearing Member at any time.

Added on 3 June 2019 3 June 2019.

5.3.3

A Trading Member must inform SGX-ST in writing prior to it:

(a) ceasing to be qualified by a Clearing Member; or

(b) replacing a qualifying Clearing Member with another Clearing Member. In such an event, the Trading Member must submit to SGX-ST a copy of the written agreement between the new qualifying Clearing Member and itself.

Added on 3 June 2019 3 June 2019.

5.3.4

A Trading Member must ensure all contracts concluded on or reported to SGX-ST are submitted to its qualifying Clearing Member for clearing.

Added on 3 June 2019 3 June 2019.

5.4 Acting as Principal to Customer

5.4.1

This Rule 5.4 shall not apply to a Remote Trading Member.

Added on 3 June 2019 3 June 2019.

5.4.2

Subject to Rule 8.1.1, if a Trading Member or its Trading Representative wants to trade as principal (as defined under Regulation 47B of the SFR (Licensing and Conduct of Business) with a customer who is not a holder of a Capital Markets Services Licence, the Trading Member (where the Trading Member is the one so trading) or the Trading Representative (where the Trading Representative is the one so trading) must inform the customer that the Trading Member or the Trading Representative is acting in the transaction as principal and not as agent.

Added on 3 June 2019 3 June 2019.

5.4.3

Any contract note relating to the above transaction must show that the Trading Member or Trading Representative acted as principal.

Added on 3 June 2019 3 June 2019.

5.4.4

This Rule 5.4 does not apply to trades that are matched on the Trading System without the Trading Member's or Trading Representative's knowledge.

Added on 3 June 2019 3 June 2019.

5.5 Acting as Agent to Customer

5.5.1

When acting as agent, a Trading Member and its Trading Representative must:

(a) carry out the customer's instructions;

(b) exercise skill, care and diligence;

(c) act in good faith;

(d) act in the best interests of customers, and comply with any obligation for best execution as set out in applicable laws and regulations;

(e) if asked, disclose all circumstances and risks that could reasonably be expected to affect a customer's decision;

(f) if asked, inform the customer of the current best bid and offer prices on the Trading System;

(g) disclose the commission and any benefit directly or indirectly receivable on the transaction;

(h) not enter into a transaction that may conflict with a duty owed to the customer, unless the customer is informed of the conflict and consents to the transaction; and

(i) not disclose a customer's order unless:

(i) the prior written consent of the customer for the disclosure of the information is obtained;

(ii) the disclosure is for the effective execution of the customer's order;

(iii) the disclosure is necessary for the risk management or operations of the Trading Member if these functions have been outsourced by the Trading Member; or

(iv) the disclosure is required or permitted under applicable law or under the Rules; and

(j) ensure that the person to whom it discloses the customer's order under Rule 5.5.1(i)(ii) and 5.5.1(i)(iii) maintains confidentiality of such information.

Added on 3 June 2019 3 June 2019.

5.6 Separation of Customer and Proprietary Trading Activities

5.6.1

A Trading Member must have procedures to effectively prevent any conflict of interest between its customer trading activities and proprietary trading activities.

Added on 3 June 2019 3 June 2019.

5.7 Precedence of Customer Orders

5.7.1

Neither a Trading Member nor a Trading Representative shall deal in securities or futures contracts for its 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 5.7 does not apply if:

(a) the Trading Member or the Trading Representative does not have access to customer's order flow information while executing for its own account or for the Prescribed Person's account;

(b) 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

(c) the transaction is entered into in circumstances prescribed by SGX-ST.

Refer to Practice Note 5.7.

Added on 3 June 2019 3 June 2019.

5.7.2

In this Rule 5.7:

(a) "Prescribed Person" means:

(i) the Trading Representative's Trading Member;

(ii) a Director of the Trading Member;

(iii) an employee, Trading Representative or agent of the Trading Member;

(iv) a person, a group of persons, a Corporation or a group of Corporations, or family trusts, whom the Trading Member, or any Director, Officer, Trading Representative, employee or agent of the Trading Member is associated with or connected to.

(b) "own account" means an account in which the Trading Member or the Trading Representative has a beneficial interest; and

(c) a reference to a person associated with another person shall have the meaning set out in section 3 of the Securities and Futures Act.

Refer to Practice Note 5.7.

Added on 3 June 2019 3 June 2019.

5.8 Arrangement with Customers

5.8.1

A Trading Member or its Trading Representative must not:

(a) 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;

(b) 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

(c) lead a customer to believe that the customer will not suffer loss as a result of opening an account or dealings.

Added on 3 June 2019 3 June 2019.

5.9 Customer Margin Management for Trading Members

5.9.1

Where a Trading Member collects margins from a customer in connection with trades executed on SGX-ST, regardless of whether such margin is required to under the Rules, the following shall apply:

(a) subject to Rule 10.9.5, nothing in the Rules prohibits the Trading Member from imposing margin requirements, haircut rates or discounts, payment periods for customers to deposit collateral, and valuations of positions and collateral, and from making calls for additional margins, as it sees fit; and

(b) where a customer fails to meet a margin call, the Trading Member shall have the discretion to take such action as it may deem appropriate, without giving notice to the customer, to reduce its exposures to the customer. Such actions may include liquidating all or any part of the customer's collateral deposited with the Trading Member, or taking action to liquidate or offset all or any part of the customer's positions. SGX-ST may also order such Trading Member to immediately take such action to offset all or such part of the positions of the customer to rectify the deficiency.

Added on 3 June 2019 3 June 2019.

5.10 Unauthorised Trading

5.10.1

A Trading Representative must not:

(a) execute his personal trades in the account of a customer;

(b) execute a customer's trades in his personal account; and

(c) use a customer's account for the trades of any third party without the customer's prior written authorisation.

Added on 3 June 2019 3 June 2019.

5.11 Excessive Trading

5.11.1

A Trading Member or a Trading Representative, when acting as agent, must not encourage transactions with the primary object of generating commission.

Added on 3 June 2019 3 June 2019.

5.12 Prohibited Trading Conduct

5.12.1

A Trading Member or a Trading Representative must not engage in any course of conduct that is likely to create a false or misleading appearance:

(a) of active trading in any security or futures contract; or

(b) with respect to the market for, or the price of, any security or futures contract.

Refer to Practice Note 5.12.

Added on 3 June 2019 3 June 2019.

5.12.2

SGX-ST's determination of whether a course of conduct is likely to create a false or misleading appearance will be made on an objective basis. The factors that SGX-ST will take into account when making that determination include but are not limited to the following:

(a) whether the execution of the transaction is inconsistent with the recent trading activity in the security or futures contract, taking into account prevailing market conditions;

(b) whether the execution of the transaction is likely to cause or contribute to a material change in the price of, or the market for, 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;

(c) whether the execution of the 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 that give the appearance of increased volume;

(d) whether the execution of transaction is likely to coincide with or influence the calculation of reference prices, settlement prices and valuations;

(e) whether parties involved in the transaction are connected or associated with each other;

(f) whether the order or orders for the purchase (or sale) of a security or futures contract is or are entered with the knowledge that an order or orders of substantially the same size, at substantially the same time and at substantially the same price, for the sale (or purchase) of the security or futures contract has been or will be entered by or for the same or different parties (excluding Direct Business);

(g) whether the execution of the transaction is likely to 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;

(h) whether the bid (or offer) is higher (or lower) than the previous bid (or offer) but is withdrawn or amended to avoid execution;

(i) whether the volume or size of the order or transaction is excessive relative to reasonable expectations of the depth and liquidity of the market at the time;

(j) whether the buy (or sell) order is likely to trade with the entire best offer (or bid) volume and part of the offer (or bid) at the next price level;

(k) whether the buy (or sell) order forms part of a series of orders that successively and consistently increase (or decrease) the price of the security or futures contract; and

(l) whether there appears to be a legitimate commercial reason for the transaction.

Refer to Practice Note 5.12.

Added on 3 June 2019 3 June 2019.

5.12.3

A Trading Member or a Trading Representative must not effect, take part in, be concerned in, or carry out, directly or indirectly, any transaction to purchase or sell a security or futures contract, being a transaction that does not involve any change in the beneficial ownership of the security or futures contract as defined in Section 197(5) of the Securities and Futures Act. It is a defence if the Trading Member or Trading Representative can show that the purpose or purposes for which it or he purchased or sold the security or futures contract was not, or did not include, the purposes of creating a false or misleading appearance with respect to the market for, or the price of, the security or futures contract.

Refer to Practice Note 5.12.3.

Added on 3 June 2019 3 June 2019.

5.12.4

A Trading Member or a Trading Representative must not knowingly execute, or hold himself out as having executed, an order for the purchase or sale of futures contracts without having effected in good faith a purchase or sale of that futures contract in accordance with the order or with the business rules and practices of an organised market on which the derivatives contract is to be purchased or sold.

Added on 3 June 2019 3 June 2019.

5.12.5

A Trading Member or a Trading Representative must not deal in a security or futures contract in a manner that will or may have the effect of raising, lowering, maintaining or stabilising the price of the security or futures contract or its underlying (where applicable), with intent to induce other persons to subscribe for, purchase or sell the security or futures contract. This Rule 5.12.5 does not apply to stabilising action carried out in accordance with Regulations 3A or 3B of the Securities and Futures (Market Conduct) (Exemptions) Regulations 2006.

Added on 3 June 2019 3 June 2019.

5.12.6

A Trading Member or a Trading Representative must not disseminate information that is false or misleading if the Trading Member or Trading Representative:

(a) knows or ought reasonably to have known that the information was false or misleading in a material particular; or

(b) does not care whether the information is true or false.

Added on 3 June 2019 3 June 2019.

5.12.7

A Trading Member or a Trading Representative must not participate in any prohibited market conduct, including any insider trading, in securities or futures contracts under the Rules or any applicable law or regulations, or knowingly assist a person in such conduct.

Added on 3 June 2019 3 June 2019.

5.12.8

A Trading Member or a Trading Representative must immediately inform SGX-ST if it or he reasonably suspects, or knows of, any attempted market manipulation, insider trading, or any other prohibited trading conduct.

Added on 3 June 2019 3 June 2019.

5.12.9

A Trading Member must have in place processes to review orders and trades for the purpose of detecting suspicious trading behaviour.

Refer to Practice Note 5.12.9.

Added on 3 June 2019 3 June 2019.

5.13 Record of Orders

5.13.1

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. The record may be electronically stored.

Added on 3 June 2019 3 June 2019.

5.13.2

A Trading Member must have adequate security measures in place to prevent unauthorised access to and/or tampering of the audit trail of orders entered into the Trading System.

Added on 3 June 2019 3 June 2019.

5.14 Dealing Assistant

5.14.1

A Trading Member may appoint a dealing assistant 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 one dealing assistant. A dealing assistant who supports a Trading Representative must be appointed by a Trading Member.

Added on 3 June 2019 3 June 2019.

5.14.2

A Trading Member must ensure that a dealing assistant solely performs an order entry role, and does not perform any regulated activity. Without limiting the generality of the foregoing, a dealing assistant shall not be permitted to:

(a) deal in securities or futures contracts, including but not limited to soliciting or inducing trades or otherwise deal in securities or futures contracts;

(b) exercise any discretion over the entry of orders;

(c) give investment advice or make recommendations to customers;

(d) accept instructions from customers;

(e) communicate with customers regarding settlement; or

(f) collect cash, cheques or share certificates on behalf of the Trading Member, designated Trading Representative(s) or customers.

Added on 3 June 2019 3 June 2019.

5.14.3

A Trading Member must notify SGX-ST of the appointment of any dealing assistant and provide SGX-ST with the name and identity card or passport number of the dealing assistant appointed.

Added on 3 June 2019 3 June 2019.

5.14.4

A Trading Member must inform SGX-ST in writing, and where practicable at least seven days in advance, if a dealing assistant ceases to act.

Added on 3 June 2019 3 June 2019.

5.15 Responsibility for Orders

5.15.1

A Trading Member is responsible for the accuracy of all orders entered into the Trading System by its Trading Representatives and any dealing assistant.

Added on 3 June 2019 3 June 2019.

5.15.2

A Trading Representative is responsible for the accuracy of orders entered into the Trading System by or on behalf of the Trading Representative.

Added on 3 June 2019 3 June 2019.

5.15.3

Orders must be entered in accordance with any procedures SGX-ST prescribes.

Added on 3 June 2019 3 June 2019.

5.15.4

A Trading Member must have in place controls to prevent unauthorised changes to order information entered into the Trading System, including Trading Representative identification numbers.

Added on 3 June 2019 3 June 2019.

5.16 Identification and Password

5.16.1

Each Trading Representative must have a unique identification number of not more than three characters and a password to enter orders into the Trading System. A Trading Member and its Trading Representatives must maintain confidentiality of the Trading Representatives' identification numbers and passwords.

Added on 3 June 2019 3 June 2019.

(b) errors made by SGX-ST or CDP.

Added on 3 June 2019 3 June 2019.