Chapter 4 Operational Requirements | Rulebooks

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SGX-ST Rules

Chapter 4 Operational Requirements

4.1 Member Systems

4.1.1

A Trading Member must ensure that:

(a) its systems and connections to the Trading System operate properly at all times and have adequate redundancy and scalable capacity to accommodate current and anticipated trading volume levels; and

(b) it complies with the terms and conditions, and any other requirements imposed by SGX-ST, for accessing the Trading System or in relation to order management systems or for any other purpose.

Refer to Regulatory Notice 4.1.

Added on 3 June 2019 3 June 2019.

4.2 Direct Market Access and Sponsored Access

4.2.1

A Trading Member may authorise Direct Market Access (including Sponsored Access) for its customers in respect of organised markets established by or operated by SGX-ST or such organised markets as SGX-ST specifies, subject to such conditions and requirements as may be specified in the Rules or prescribed by SGX-ST from time to time.

Refer to Practice Note 4.2.

Added on 3 June 2019 3 June 2019.

4.2.2

A Trading Member that authorises Sponsored Access for its customers must maintain a register recording the identity and address of all customers with Sponsored Access, and produce such register to SGX-ST at its request.

Added on 3 June 2019 3 June 2019.

4.2.3

A Trading Member that authorises Direct Market Access (including Sponsored Access) for a customer must enter into a legally binding agreement with the customer setting out the terms and conditions for such Direct Market Access. The agreement must include requirements, and the Trading Member must have measures in place, for:

(a) the customer to meet minimum standards including standards on financial standing, credit history and criminal records, adverse records or pending court proceedings relating to prohibited market conduct;

(b) the customer to have appropriate procedures in place to assure that all relevant persons:

(i) are familiar with and comply with the Rules;

(ii) have knowledge and proficiency in the use of the order management system;

(c) the customer to be provided information concerning its access to the Trading System and applicable laws;

(d) the customer to have security arrangements in place to ensure that unauthorised persons are denied such Direct Market Access;

(e) the customer to assist SGX-ST promptly in any investigation into potential violations of the Rules and applicable laws, including the provision of information to SGX-ST relating to the identity and address of any person who may be responsible for the execution of an order or trade;

(f) the customer to comply with Rules 4.1 and 4.13 (in a case where the customer is given Sponsored Access);

(g) the customer to be permitted to delegate, and any other person to be permitted to delegate, Sponsored Access only if the delegating person is:

(I) regulated by a recognised regulatory authority in respect of any regulated activity; or

(II) a Trading Member of SGX-ST in which event it may only delegate Sponsored Access to its related corporations;

for the purpose of this Rule 4.2.3(g), "recognised regulatory authority" refers to a signatory to the International Organization of Securities Commissions' Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information, and "regulated activity" shall have the same meaning as in the Securities and Futures Act;

(h) the customer to ensure, and any other person delegating Sponsored Access to ensure, that all persons given Sponsored Access are included in the register referred to in Rule 4.2.2; and

(i) the customer to ensure, and any other person delegating Direct Market Access to ensure, that all persons given Direct Market Access are subject to the requirements in this Rule 4.2.3.

Added on 3 June 2019 3 June 2019.

4.2.4

SGX-ST may require a Trading Member to provide to SGX-ST a report by an independent reviewer on the Trading Member's compliance with Rules 4.2 and 4.3.2.

Added on 3 June 2019 3 June 2019.

4.3 Suspension and Termination of Direct Market Access

4.3.1

SGX-ST may without prior notice suspend or terminate or direct a Trading Member to suspend or terminate immediately a person's Direct Market Access:

(a) where the person has failed to assist SGX-ST with an investigation in accordance with Rule 4.2.3(e);

(b) in the interest of a fair, orderly and transparent market; or

(c) where the person or Trading Member has breached any of the Rules or any applicable laws.

Added on 3 June 2019 3 June 2019.

4.3.2

A Trading Member must have the ability to immediately suspend or terminate a person's Direct Market Access when necessary for the fulfilment of its duties under the Rules or any other reason.

Added on 3 June 2019 3 June 2019.

4.4 Control of Access

4.4.1

A Trading Member must ensure that there are adequate security arrangements in place to ensure that unauthorised persons are denied access to the organised markets established by or operated by SGX-ST and/or such organised markets as SGX-ST specifies.

Added on 3 June 2019 3 June 2019.

4.5 Responsibility to SGX-ST

4.5.1

A Trading Member is responsible to SGX-ST for:

(a) any liability to SGX-ST of its Directors, Officers, Trading Representatives, employees and agents; and

(b) the acts and omissions of its Directors, Officers, Trading Representatives, employees and agents.

Added on 3 June 2019 3 June 2019.

4.6 Training and Supervision

4.6.1

A Trading Member must ensure that each of its Trading Representatives undergoes adequate education and training, including such continuing education and training as SGX-ST may prescribe, as may be necessary for the Trading Representative to discharge his duties and obligations.

Added on 3 June 2019 3 June 2019.

4.6.2

A Trading Member must supervise its Trading Representatives, employees and agents.

Added on 3 June 2019 3 June 2019.

4.6.3

A Trading Member must:

(a) establish and maintain procedures and systems to prevent any breach of the Rules by its Directors, Officers, Trading Representatives, employees or agents; and

(b) ensure that its Trading Representatives, employees, agents or any other person carrying out or enforcing its procedures and systems reasonably discharges his or her duties and obligations.

Added on 3 June 2019 3 June 2019.

4.7 Compliance Review

4.7.1

A Trading Member must carry out checks from time to time to ensure its and its Directors', Officers', Trading Representatives', employees' and agents' compliance with:

(a) the regulatory requirements of the Relevant Regulatory Authority;

(b) the Rules and any Approval Conditions; and

(c) its policies and procedures.

Added on 3 June 2019 3 June 2019.

4.7.2

The checks must be carried out by internal audit or the compliance department or a person whose reporting line is independent of dealing, sales and operations.

Added on 3 June 2019 3 June 2019.

4.8 Good Business Practice

4.8.1

Trading Members and Trading Representatives must adhere to the principles of good business practice in the conduct of their business affairs.

Added on 3 June 2019 3 June 2019.

4.9 Control of Operations

4.9.1

A Trading Member must establish and maintain adequate internal control systems, commensurate with the nature, scale and complexity of the business of the Trading Member.

Added on 3 June 2019 3 June 2019.

4.9.2

A Trading Member must, where appropriate, establish internal policies and procedures to restrict the flow of material non-public information between persons and departments within the Trading Member.

Added on 3 June 2019 3 June 2019.

4.9.3

A Trading Member must have processes in place to minimise and manage any conflicts of interest, including but not limited to separating its front and back office functions.

Refer to Practice Note 4.9.3.

Added on 3 June 2019 3 June 2019.

4.10 Risk Management and Financial Controls

4.10.1

A Trading Member must have written policies and procedures on risk management control and demonstrate compliance in the following areas:

(a) monitoring the credit risks arising from the acceptance of all orders, on at least a daily basis;

(b) ensuring that:

(i) adequate pre-execution risk management control checks are conducted, including automated credit control checks on every order and trading limits for each Trading Representative; and

(ii) there are appropriate internal controls and assessments conducted for the setting and modification of any parameters of such pre-execution risk management control checks;

(c) having error-prevention alerts to bring attention to possible erroneous entries of price, order size and other data fields; and

(d) defining and managing the Trading Member's sources of liquidity to ensure that there are sufficient liquidity facilities to meet settlement obligations.

Refer to Practice Note 4.10.1(b).

Refer to Practice Note 4.10.1(c).

Added on 3 June 2019 3 June 2019.

4.10.2

A Trading Member must have automated processes and procedures in place to monitor at the firm level if the Trading Member is at risk of breaching capital and financial requirements and prudential limits on exposures to a single customer and a single security, so as to restrict trading activity, inject additional capital or take such steps as are necessary to prevent such breach.

Refer to Practice Note 4.10.2.

Added on 3 June 2019 3 June 2019.

4.11 Outsourcing Conditions

4.11.1

A Trading Member that outsources any of its operations must:

(a) comply with any guidelines or requirements on outsourcing as prescribed by the Relevant Regulatory Authority. A Remote Trading Member shall immediately inform SGX-ST of any changes to such requirements and comply with such additional requirements as SGX-ST may prescribe;

(b) have in place adequate audit trails of the activities performed by the service provider;

(c) ensure that the service provider provides SGX-ST with any information, including records of the work done by the service provider and any other records maintained by the service provider, that SGX-ST requests within SGX-ST's prescribed timeline;

(d) ensure that the service provider provides SGX-ST access to all relevant records and systems and that SGX-ST is able to perform on-site inspections of the outsourced operations in the same way as if the outsourced operations were residing in the Trading Member and without any costs to SGX-ST;

(e) inform SGX promptly of any disciplinary actions taken against the service provider, or any issues raised by internal or external auditors or any authority that regulates the service provider pertaining to the activities outsourced to the service provider; and

(f) ensure that the internal audit requirements prescribed by SGX-ST are also complied with in relation to the outsourced operations.

Added on 3 June 2019 3 June 2019.

4.11.2

If activities that a Trading Member would ordinarily have carried out during SGX operative hours are outsourced, the Trading Member must ensure that the service provider is operative whenever SGX-ST is open for trading.

Added on 3 June 2019 3 June 2019.

4.12 Business Continuity Requirements

4.12.1

A Trading Member must assess its business and operational risks and maintain adequate business continuity arrangements. Such business continuity arrangements must be documented in a business continuity plan, and must be reviewed and tested regularly.

Added on 3 June 2019 3 June 2019.

4.12.2

A Trading Member's senior management shall be responsible for the Trading Member's business continuity plan. Sufficient awareness of the risks, mitigating measures and state of readiness must be demonstrated by way of an attestation to the Trading Member's board of Directors. A Remote Trading Member shall comply with such requirements established by the Relevant Regulatory Authority, if any, and principles of good business practice in relation to business continuity planning.

Added on 3 June 2019 3 June 2019.

4.12.3

A Trading Member must appoint emergency contact persons, and furnish the contact information of such persons to SGX-ST. The Trading Member's emergency contact persons must be contactable at all times, and must immediately notify SGX-ST in the event of emergencies.

Refer to Practice Note 4.12.

Added on 3 June 2019 3 June 2019.

4.13 Records for Compliance

4.13.1

A Trading Member and its Trading Representatives must:

(a) maintain proper, complete and accurate records and audit trails, including a complete audit trail of transactions, whether entered into for itself or the Trading Member's customers, from the receipt of an order to its settlement, to evidence compliance with the Rules in accordance with:

(i) in the case of a Trading Member that holds a Capital Markets Services Licence, the requirements in the Securities and Futures Act and the Rules; and

(ii) in the case of a Remote Trading Member, such requirements as may be prescribed by the Relevant Regulatory Authority and the Rules. The Remote Trading Member shall immediately notify SGX-ST of any changes to the requirements prescribed by the Relevant Regulatory Authority. Notwithstanding the foregoing, SGX-ST shall have the discretion to prescribe additional requirements;

(b) not make, or cause to be made, any false or misleading entries in any books, records, slips, documents, or statements relating to the business, affairs, transactions, conditions, assets or accounts of the Trading Member (whether such documents are in hardcopy or electronic form) (the "Documents");

(c) make or cause to be made all relevant entries in each of the Documents; and

(d) not alter, conceal or destroy or cause to be altered, concealed or destroyed any of the Documents without a valid reason.

Refer to Regulatory Notice 4.13.1 and Regulatory Notice 4.13, 4.16, 4.24, 4.25 and 4.29.

Added on 3 June 2019 3 June 2019.

4.13.2

A Trading Member and its Trading Representative must ensure the integrity, security and confidentiality in the transmission and storage of all records. A Trading Member must keep data and records such that they are easily retrievable by authorised personnel and are stored securely such that no tampering occurs. Backups of records must be kept at a location separate from the original records. A Trading Member must check data and records for quality and accuracy on an on-going basis and correct any quality or accuracy defects detected.

Added on 3 June 2019 3 June 2019.

4.13.3

A Trading Member must make records available to SGX-ST at such time as SGX-ST prescribes or otherwise requires. The Trading Member must obtain the necessary customer consent for such disclosure, prior to such disclosure being made.

Refer to Regulatory Notice 4.13, 4.16, 4.24, 4.25 and 4.29.

Added on 3 June 2019 3 June 2019.

4.14 Confidentiality of Customer's Information

4.14.1

A Trading Member and its Trading Representative must maintain confidentiality of a customer's information, except where required or permitted under applicable law or under the Rules, or in accordance with the prior consent of the customer for the disclosure of such information.

Added on 3 June 2019 3 June 2019.

4.14.2

A Trading Member must ensure that a person to whom it discloses a customer's information maintains confidentiality of such information.

Added on 3 June 2019 3 June 2019.

4.15 Opening of Customer Accounts

4.15.1

This Rule shall not apply to a Remote Trading Member.

Added on 3 June 2019 3 June 2019.

4.15.2

Prior to opening a customer account, a Trading Member shall satisfy itself that it has:

(a) obtained adequate particulars of each customer;

(b) verified the identity of each customer, and in the case of a non-individual customer verified that it is validly constituted and that the person opening the account has the requisite authority to do so, and in the case of an agency customer, verified the identity of the principal and the customer's authority to trade for its principal;

(c) agreed with the customer procedures for the communication of trading instructions to guard against unauthorised trading (if applicable); and

(d) understood each customer's risk appetite and investment objectives (if applicable),

in accordance with applicable know-your-customer laws and regulatory requirements.

Refer to Practice Note 4.15.2(a) and (b) and Practice Note 4.15.2(d).

Added on 3 June 2019 3 June 2019.

4.15.3

Before opening a customer account for a customer under the age of 21, a Trading Member shall assess the customer's suitability to trade and disclose the risks of trading to the customer.

Refer to Practice Note 4.15.3.

Added on 3 June 2019 3 June 2019.

4.15.4

Joint Customer Account

(a) A Trading Member may allow customers to open a joint account carried on its books only if:

(i) a joint securities account with CDP is opened by the joint account holders;

(ii) each joint account holder is at least 18 years old; and

(iii) no joint account holder is an undischarged bankrupt.

(b) A joint customer account may be operated by not more than two individual customers. However, if it is an estate account, it may be operated by all personal representatives acting on behalf of the estate of the deceased.

(c) In addition to the matters set out in Rule 4.15.2, a Trading Member must obtain the following information:

(i) the names of persons authorised to give trading orders and settlement instructions to, and receive scrip from, the Trading Member;

(ii) the names of persons to whom payments by the Trading Member are to be made; and

(iii) details of any customer accounts carried on the books of the Trading Member held in an individual capacity by a joint customer account holder.

(d) A Trading Member must require each joint customer account holder to specify whether the joint customer account holder is jointly, severally, or jointly and severally liable for all debts incurred in a joint customer account.

Added on 3 June 2019 3 June 2019.

4.15.5

Approval of Customer Accounts

(a) At least one member of senior management or delegate staff (whether of the Trading Member or the Trading Member's related corporation or otherwise) independent of the Trading Member's sales or dealing, must approve the opening of a customer account carried on the books of the Trading Member.

(b) The approval must:

(i) be given before the execution of the first trade for the customer;

(ii) be in writing (which includes secured electronic record); and

(iii) form part of the permanent records of the Trading Member.

Added on 3 June 2019 3 June 2019.

4.16 Risk Disclosure

4.16.1

A Trading Member must ensure that its customer is aware of and must obtain a written acknowledgement from the customer that the customer is aware of and understands the risks associated with holding and trading securities and futures contracts, and it informs its customer whether the Trading Member is acting as a principal or an agent for the customer in accordance with:

(a) in the case of a Trading Member that holds a Capital Markets Services Licence, Regulation 47DA of the SFR (Licensing and Conduct of Business); and

(b) in the case of a Remote Trading Member, such requirements as may be prescribed by the Relevant Regulatory Authority. The Remote Trading Member shall immediately notify SGX-ST of any changes to such requirements. Notwithstanding the foregoing, SGX-ST shall have the discretion to prescribe additional requirements.

Refer to Regulatory Notice 4.13, 4.16, 4.24, 4.25 and 4.29.

Added on 3 June 2019 3 June 2019.

4.17 Separate Trading Accounts and Account Designation

4.17.1

A Trading Member must maintain separate Trading Accounts for each customer or each group of joint customers (as the case may be) whose customer account is carried on the books of the Trading Member.

Added on 3 June 2019 3 June 2019.

4.17.2

Each Trading Account must be identified and designated by the full name of the customer(s) whose customer account is carried on the books of the Trading Member and by a unique Trading Account code, both of which must be reported to SGX-ST before the Trading Account is used to send in any orders.

Added on 3 June 2019 3 June 2019.

4.18 Customer Education

4.18.1

This Rule shall not apply to a Remote Trading Member.

Added on 3 June 2019 3 June 2019.

4.18.2

Save for Accredited Investors, Institutional Investors and Expert Investors, a Trading Member must provide its Internet Trading customers with adequate information, guidance and training on:

(a) prohibited trading practices;

(b) potential limitations and risks of Internet Trading;

(c) system functionalities and order management procedures; and

(d) market conventions such as minimum bid sizes and board lot sizes.

Added on 3 June 2019 3 June 2019.

4.18.3

With respect to Accredited Investors, Institutional Investors and Expert Investors, a Trading Member's obligation relates solely to the provision of adequate information in relation to prohibited trading practices.

Refer to Practice Note 4.18.

Added on 3 June 2019 3 June 2019.

4.19 Trading by Employees and Agents

4.19.1

A Trading Member must have in place procedures to ensure that its Directors, Officers, Trading Representatives, employees and agents who are privy to confidential information relating to dealing in securities or futures contracts do not use such information to trade for their own benefit.

Added on 3 June 2019 3 June 2019.

4.19.2

A Trading Member must have in place procedures to monitor the trading activities of its Directors, Officers, Trading Representatives, employees and agents whether those trading activities are conducted through the Trading Member or another Trading Member.

Added on 3 June 2019 3 June 2019.

4.20 Arrangements with Remisiers

4.20.1

A Trading Member must inform SGX-ST in writing at least seven days before a Dealer converts to a Remisier or vice versa, provided that SGX-ST may vary or waive the notice period at its discretion.

Added on 3 June 2019 3 June 2019.

4.20.2

Where it engages a Remisier, a Trading Member shall:

(a) enter into a written agency arrangement setting out all terms of its relationship with the Remisier;

(b) conduct a credit assessment of the Remisier;

(c) assign trading or other limits to such Remisier to restrict the Remisier's volume of business, such limits to take into account the credit assessment, and security deposit required, of the Remisier; and

(d) require that the Remisier place a security deposit in the form of cash, acceptable collateral or a guarantee from a bank or financial institution operating in Singapore, of an amount determined by the Trading Member, taking into account the credit assessment of, and trading limit imposed on, the Remisier.

Added on 3 June 2019 3 June 2019.

4.21 Remisiers Working in Teams

4.21.1

A Trading Member may allow the Remisiers that it appoints as Trading Representatives to work in teams where Remisiers in the same team may enter orders for one another's customers.

Added on 3 June 2019 3 June 2019.

4.21.2

A Trading Member must:

(a) maintain a list of Remisiers working in teams, according to the teams they work in;

(b) establish in writing the terms and conditions of each team arrangement with its Remisiers. The terms and conditions must include:

(i) how possible disputes amongst Remisiers working in teams are to be resolved; and

(ii) that Remisiers working in a team shall be jointly and severally liable for losses incurred by customers serviced by the team where such losses are not recovered;

(c) ensure that Remisiers working in teams will not compromise their compliance with all relevant legislation and regulations; and

(d) monitor team operations to ensure there is no overtrading, and that irregularities do not occur.

Added on 3 June 2019 3 June 2019.

4.21.3

Trading Members must keep customers informed of the team arrangements, and give customers the option not to be serviced by Remisiers working in teams. Trading Members should also keep their customers informed of any changes to team compositions.

Added on 3 June 2019 3 June 2019.

4.21.4

If a customer's order is passed along a chain of Remisiers in a team, each Remisier must record from and to whom he receives and transmits the order, and the time of such receipt and transmission.

Added on 3 June 2019 3 June 2019.

4.22 Trading Authority

4.22.1

This Rule shall not apply to a Remote Trading Member.

Added on 3 June 2019 3 June 2019.

4.22.2

Before accepting any orders for a customer's account from a third party, a Trading Member must obtain written authorisation from the customer authorising the third party to trade for the customer's account carried on the books of the Trading Member.

Added on 3 June 2019 3 June 2019.

4.23 Brokerages and Charges

4.23.1

Unless SGX-ST decides otherwise, the commission rate chargeable for the purchase or sale of securities and futures contracts may be determined by the Trading Member in its discretion.

Added on 3 June 2019 3 June 2019.

4.23.2

All charges and expenses, including any fees imposed by CDP and/or SGX-ST, stamp duty and Goods and Services Tax, to be borne by the customer (whether included as part of the brokerage or otherwise) must be accurately disclosed to the customer and agreed between the customer and the Trading Member.

Added on 3 June 2019 3 June 2019.

4.24 Contract Notes

4.24.1

A Trading Member must send its customer a contract note for any purchase or sale of securities or futures contracts.

Refer to Regulatory Notice 4.24.1.

Added on 3 June 2019 3 June 2019.

4.24.2

The contract note must state that the contract is subject to the Rules if the trade is:

(a) transacted on or through the Trading System; or

(b) reported to SGX-ST.

Added on 3 June 2019 3 June 2019.

4.24.3

In the case of a Trading Member that holds a Capital Markets Services Licence:

(a) the contract note must comply with the requirements of the Securities and Futures Act and must show separately, where applicable:

(i) brokerage charged by the Trading Member;

(ii) stamp duty;

(iii) Goods and Services Tax;

(iv) any other fees in addition to the brokerage charged by the Trading Member; and

(v) any other fees in addition to the brokerage charged that are charged by any other party (including CDP and/or SGX-ST) and borne by the customer;

(b) the contract note must clearly distinguish charges levied by the Trading Member from charges levied by SGX-ST and/or CDP; and

(c) before issuing contract notes in electronic form, the Trading Member must obtain the customer's prior revocable and informed consent for receipt of contract notes in electronic form. The Trading Member must retain evidence of the customer's consent. To constitute informed consent, a customer must be told of the manner of delivery and retrieval of the electronic record and any costs that may be incurred.

Refer to Practice Note 4.24.3(c).

Added on 3 June 2019 3 June 2019.

4.24.4

In the case of a Remote Trading Member, a contract note must comply with such requirements as may be prescribed by the Relevant Regulatory Authority, including requirements relating to a customer's contract note in electronic form. The Remote Trading Member shall immediately notify SGX-ST of any changes to such requirements. Notwithstanding the foregoing, SGX-ST shall have the discretion to prescribe additional requirements.

Refer to Regulatory Notice 4.13, 4.16, 4.24, 4.25 and 4.29.

Added on 3 June 2019 3 June 2019.

4.24.5

If asked by SGX-ST, a Trading Member must produce a copy or record of the contract notes in substantially the same form and containing the same trading information as were given to customers.

Added on 3 June 2019 3 June 2019.

4.25 Statements of Account to Customers

4.25.1

A Trading Member must send its customers statements of account on a regular basis in accordance with:

(a) in the case of a Trading Member that holds a Capital Markets Services Licence, Regulation 40 of the SFR (Licensing and Conduct of Business); and

(b) in the case of a Remote Trading Member, such requirements as may be prescribed by the Relevant Regulatory Authority. The Remote Trading Member shall immediately notify SGX-ST of any changes to such requirements. Notwithstanding the foregoing, SGX-ST shall have the discretion to prescribe additional requirements.

Refer to Regulatory Notice 4.13, 4.16, 4.24, 4.25 and 4.29.

Added on 3 June 2019 3 June 2019.

4.25.2

If asked by SGX-ST, a Trading Member must produce a copy or record of the statements of account in substantially the same form and containing the same information as given to customers.

Added on 3 June 2019 3 June 2019.

4.26 Amendment of Contract

4.26.1

This Rule shall not apply to a Remote Trading Member.

Added on 3 June 2019 3 June 2019.

4.26.2

In the event that a Trading Member seeks to amend a contract, including but not limited to changes to price, quantity or account number, approval of senior management (or delegate staff) independent of the sales or dealing function of the Trading Member must be obtained prior to any such amendment. Such senior management (or delegate staff) should consider whether there is a valid reason for the amendment.

Added on 3 June 2019 3 June 2019.

4.27 Communication with Customers

4.27.1

This Rule shall not apply to a Remote Trading Member.

Added on 3 June 2019 3 June 2019.

4.27.2

A Trading Member must communicate directly with its customers in respect of statements, contract notes or all other information, whether in writing or electronically, unless the customer has authorised otherwise in writing.

Added on 3 June 2019 3 June 2019.

4.27.3

To guard against unauthorised trading, contract notes and statements must be sent to the customer's residential address or any other address authorised by the customer. If the customer chooses for contract notes and statements to be sent to a "care of" address or the Trading Representative's address, the Trading Member must explain the risk of unauthorised trading to the customer, obtain the customer's written authorisation for such an arrangement, and monitor the customer's accounts for any unauthorised trading activities.

Added on 3 June 2019 3 June 2019.

4.27.4

A Trading Member must not allow any person other than the customer to collect any cash, share certificates, contract notes, credit or debit notes, cheques or statements, unless the customer has authorised that person in writing.

Added on 3 June 2019 3 June 2019.

4.28 Payment to Customers

4.28.1

This Rule shall not apply to a Remote Trading Member.

Added on 3 June 2019 3 June 2019.

4.28.2

All cheques to customers must be crossed, unless:

(a) the payee customer requests otherwise in writing; and

(b) a senior management staff (or his delegate) of a Trading Member who is independent of sales or dealing, or a senior management staff (or his delegate) of a related corporation of that Trading Member charged with the payment function, authorises the request in writing.

Added on 3 June 2019 3 June 2019.

4.28.3

A Trading Member must not accept a house cheque (a crossed cheque issued by the Trading Member in favour of a customer) from a customer unless:

(a) the customer is the payee of the cheque; and

(b) the cheque is used to settle an amount owing by the customer to the Trading Member or is deposited into a trust account under Rule 4.31, as directed by the customer.

Added on 3 June 2019 3 June 2019.

4.29 Segregation of Customer's and Remisier's Monies and Assets

4.29.1

A Trading Member must:

(a) segregate monies and assets of customers (including Remisiers) from the Trading Member's monies and assets;

(b) deposit monies and assets of customers (including Remisiers) in trust or custody accounts; and

(c) separately account for the monies and assets of each customer (including each Remisier).

Added on 3 June 2019 3 June 2019.

4.29.2

A Trading Member that holds a Capital Markets Services Licence must comply with such requirements prescribed in Rules 4.30 and 4.31.

Added on 3 June 2019 3 June 2019.

4.29.3

A Remote Trading Member must comply with such requirements as may be prescribed by the Relevant Regulatory Authority. The Remote Trading Member shall immediately notify SGX-ST of any changes to such requirements. Notwithstanding the foregoing, SGX-ST shall have the discretion to prescribe additional requirements.

Refer to Regulatory Notice 4.13, 4.16, 4.24, 4.25 and 4.29.

Added on 3 June 2019 3 June 2019.

4.29.4

A "customer" for the purposes of Rules 4.29, 4.30 and 4.31 does not include (a) any Officer, Director, employee or representative of the Trading Member; or (b) a related corporation of the Trading Member with respect to an account belonging to and maintained wholly for the benefit of that related corporation; but includes a Remisier of the Trading Member.

Added on 3 June 2019 3 June 2019.

4.30 Segregation of Customer's and Remisier's Monies and Assets — Monies

4.30.1

This Rule shall not apply to a Remote Trading Member.

Added on 3 June 2019 3 June 2019.

4.30.2

A Trading Member must comply with Part III, Divisions 2 and 4 of the SFR (Licensing and Conduct of Business) on customer's monies in respect of any money received by the Trading Member on account of any customer (including a Remisier) save that Regulation 16(1)(b) of the SFR (Licensing and Conduct of Business) does not apply to a Remisier and a Trading Member must deposit all money received on account of a Remisier in a trust account.

Added on 3 June 2019 3 June 2019.

4.30.3

A Trading Member must designate the accounts maintained with a financial institution specified in Regulation 17 of the SFR (Licensing and Conduct of Business) for a customer (other than a Remisier) or a Remisier as a trust account, or as a customer (other than a Remisier) or Remisier account, as the case may be.

Added on 3 June 2019 3 June 2019.

4.30.4

A Trading Member must deposit money received on account of its customers (other than Remisiers) in a separate trust account from money received on account of its Remisiers.

Added on 3 June 2019 3 June 2019.

4.30.5

A Trading Member must not commingle money received on account of its customers (including its Remisiers) with its own funds. However, a Trading Member may deposit its own funds into a trust account under the circumstances specified in Regulation 23(1) of the SFR (Licensing and Conduct of Business).

Added on 3 June 2019 3 June 2019.

4.30.6

A Trading Member must not withdraw a Remisier's money from a trust account except to:

(a) pay the Remisier;

(b) meet any amount due and payable by the Remisier to the Trading Member;

(c) reimburse the Trading Member for any money advanced to the trust account, and any interest and returns that the Trading Member is entitled to, provided the withdrawal does not result in the trust account becoming under-margined or under-funded; or

(d) make a payment or withdrawal that is authorised by law.

Added on 3 June 2019 3 June 2019.

4.30.7

A Trading Member must notify the Remisier of any withdrawal under Rule 4.30.6 by the next Market Day.

Added on 3 June 2019 3 June 2019.

4.31 Segregation of Customer's and Remisier's Monies and Assets — Assets

4.31.1

This Rule shall not apply to a Remote Trading Member.

Added on 3 June 2019 3 June 2019.

4.31.2

A Trading Member must comply with Part III, Divisions 3 and 4 of the SFR (Licensing and Conduct of Business) on customer's assets in respect of any assets received by the Trading Member to be held on account of a customer (including a Remisier), or as collateral for any amount owed by the customer (including a Remisier) to the Trading Member, save that Regulations 30, 33 and 34 of the SFR (Licensing and Conduct of Business) do not apply to a Remisier.

Added on 3 June 2019 3 June 2019.

4.31.3

A Trading Member must designate the accounts maintained with a financial institution specified in Regulation 27 of the SFR (Licensing and Conduct of Business) for a customer (other than a Remisier) or Remisier as a trust account, or customer (other than a Remsier) or Remisier account, as the case may be.

Added on 3 June 2019 3 June 2019.

4.31.4

A Trading Member must deposit assets of its customers (other than Remisiers) in a separate custody account from assets of its Remisiers.

Added on 3 June 2019 3 June 2019.

4.31.5

A Trading Member must not commingle the assets of a customer (including a Remisier) with its own assets.

Added on 3 June 2019 3 June 2019.

4.31.6

A Trading Member must not withdraw a Remisier's assets from a custody account except to:

(a) return the assets to the Remisier;

(b) use the assets to meet any amount due and payable by the Remisier to the Trading Member; or

(c) make a transfer or withdrawal that is authorised by law.

Added on 3 June 2019 3 June 2019.

4.31.7

A Trading Member must notify the Remisier of any withdrawal under Rule 4.31.6 by the next Market Day.

Added on 3 June 2019 3 June 2019.

4.32 Reporting of Delinquent Accounts

4.32.1

This Rule shall not apply to Remote Trading Members.

Added on 3 June 2019 3 June 2019.

4.32.2

A Trading Member must inform SGX-ST (or any designated third party) of the particulars of any customer account carried on the books of the Trading Member that it considers to be delinquent. SGX-ST (or the designated third party) may disseminate such information that it receives to all other Trading Members that hold a Capital Markets Services Licence.

Added on 3 June 2019 3 June 2019.

4.33 Stock Account

4.33.1

This Rule shall not apply to a Remote Trading Member.

Added on 3 June 2019 3 June 2019.

4.33.2

All purchases and sales of securities or futures contracts by a Trading Member for its proprietary account must be made under a separate Stock Account of the Trading Member.

Added on 3 June 2019 3 June 2019.

4.33.3

A Stock Account must be operated by a person who is licensed to trade, as designated, pursuant to a delegation of authority, by a member of senior management or delegate staff who is independent of the member's proprietary desk. The Trading Member shall procure that the senior management or an independent delegate appointed by senior management shall oversee the operation of the Stock Account by the designate.

Added on 3 June 2019 3 June 2019.

4.34 Position Accounts

4.34.1

In this Rule:

"Authorised Trading Member" means a Trading Member who has been duly authorised by its qualifying Clearing Member to open and maintain Position Accounts or to open, maintain and allocate positions to Position Accounts, as the case may be.

"Authorised Account" means the Position Account (of the Authorised Trading Member or of the Authorised Trading Member's customer) that an Authorised Trading Member is authorised by its qualifying Clearing Member to open and maintain, or to open, maintain and allocate positions to.

Added on 3 June 2019 3 June 2019.

4.34.2

The Clearing Rules relating to Position Accounts shall, where relevant and with the necessary modifications, apply to an Authorised Trading Member in respect of each Authorised Account as they apply to a Clearing Member.

Added on 3 June 2019 3 June 2019.

4.34.3

Authorised Accounts carrying positions for more than one beneficial owner

(a) Subject to Rule 4.34.3(b), an Authorised Trading Member shall identify any underlying beneficial owner and/or any controlling party of any Authorised Account or ensure that such information is available to SGX-ST. This shall be provided upon request by SGX-ST within such time as SGX-ST may require.

(b) If the Authorised Account holder does not want the identity of any underlying beneficial owner and/or any controlling party of such account to be disclosed to its Trading Member, the Authorised Account holder may apply to SGX-ST, through its Trading Member, to provide such information as SGX-ST may require directly to SGX-ST.

Added on 3 June 2019 3 June 2019.

4.34.4

Where a Trading Member is not authorised to allocate positions to an Authorised Account:

(a) The Trading Member shall instruct its qualifying Clearing Member to allocate the position of each trade executed by the Trading Member to the Trading Member's Position Account(s) or, where the position is of a trade executed for a customer, in accordance with that customer's instructions, as soon as practicable, and in any event no later than such time as may be required for timely and orderly settlement of such trade into the intended Securities Account.

(b) A customer's Position Account must only be used for that customer's positions. However, a Trading Member may instruct its qualifying Clearing Member to sub-allocate a position carried in a Position Account to another Position Account, provided that:

(i) (I) such sub-allocation is in accordance with the instructions of the account holders (or person(s) authorised to instruct on their behalf) of both Position Accounts; and (II) the Trading Member receives the booking instruction only after the position has been allocated to the originating Position Account; or

(ii) such sub-allocation is made to remedy an error.

Refer to Regulatory Notice 4.34.4 and 4.34.5.

Added on 3 June 2019 3 June 2019.

4.34.5

Holding trades for different customers in a Position Account and warehousing of trades

(a) A Position Account in the name of a Trading Member may be used to hold positions of trades for different customers, provided that the Trading Member has procedures to ensure fair allocation to the customers.

(b) If a customer's order is unlikely to be completed during a Market Day, the Trading Member may warehouse the customer's trades until the order is completed. The Trading Member must ensure that no customer's trade is warehoused for more than one Market Day, unless under exceptional circumstances. In such cases, the Trading Member must document the reasons for the extension of time.

Refer to Regulatory Notice 4.34.4 and 4.34.5.

Added on 3 June 2019 3 June 2019.

4.35 Broker-linked Balances

4.35.1

A Trading Member linked to a broker-linked balance must have a written agreement with the holder of the broker-linked balance setting out (a) the circumstances under which the Trading Member may cause securities to be delivered or transferred into the broker-linked balance; and (b) the conditions to which the Trading Member's rights over the securities in the broker-linked balance are subject. The Trading Member must provide the written agreement to SGX-ST for inspection if requested.

Added on 3 June 2019 3 June 2019.

4.35.2

The Trading Member shall act in accordance with the written agreement, the Rules and the Securities and Futures Act, save that nothing in the Rules shall prevent a Trading Member from releasing securities from the broker-linked balance linked to it into the customer's main balance.

Added on 3 June 2019 3 June 2019 and amended on 18 January 2022.

4.35.3

Subject to Rule 4.35.4, a Trading Member must approve the release of securities from the broker-linked balance linked to it by the end of the Market Day following the day on which it receives the customer's request for such release. SGX-ST may, at its discretion, waive or vary this timeline. In accordance with Rule 4.13.1, a Trading Member must maintain proper, complete and accurate records of each customer's requests and its response to such requests.

Added on 3 June 2019 3 June 2019.

4.35.4

A Trading Member may withhold approval for the release of any securities from a broker-linked balance linked to it only to the extent necessary to secure an obligation owed to it by the holder of the broker-linked balance.

Added on 3 June 2019 3 June 2019.

4.35.5

A Trading Member that does not approved a customer's request for release of any securities must:

(a) by the end of the Market Day following the day in which it receives the customer's request, inform the customer that the request has been rejected and securities will not be released;

(b) provide the reason(s) for not releasing the securities, including details of the obligation(s) that is owed by the customer to the Trading Member, including the value thereof, if so requested by the customer, by the Market Day following the day on which it receives the customer's request for reason(s) and/or details; and;

(c) provide the customer with such information and by such time as SGX-ST may prescribe from time to time.

SGX-ST may, at its discretion, waive or vary any of the timelines in this Rule.

In accordance with Rule 4.13.1, a Trading Member must maintain proper, complete and accurate records of each customer's requests and its response to such requests.

Added on 3 June 2019 3 June 2019.

4.35.6

SGX-ST may, in respect of any Securities Account that is maintained directly with it:

(a) transfer securities out of a broker-linked balance into the main balance, notwithstanding that the Trading Member linked to the broker-linked balance has not approved the transfer, if SGX-ST is of the view that the Trading Member has failed to comply with the Rules;

(b) refuse to transfer securities into a broker-linked balance if the Trading Member linked to the broker-linked balance has had its trading rights ceased, is suspended or has been terminated under the Rules.

Added on 3 June 2019 3 June 2019.

4.35.7

A resigning Trading Member must, in respect of each customer that has a broker-linked balance linked to it, release all securities in the broker-linked balance into the customer's main balance by the effective date of resignation.

Added on 3 June 2019 3 June 2019.

4.36 Advertising

4.36.1

A Trading Member must ensure that any advertising or publicity:

(a) is accurate;

(b) is not misleading;

(c) does not contain claims that are not externally verifiable;

(d) does not contain any predictions or projections of investment performance unless accompanied by the supporting basis; and

(e) does not tend to bring SGX or its related corporations, or other Trading Members, into disrepute.

Added on 3 June 2019 3 June 2019.

4.36.2

A Remote Trading Member shall not direct any advertising or publicity to deal in securities or futures contracts on SGX-ST to customers resident in Singapore or to the extent that it may be acted upon by customers in Singapore.

Added on 3 June 2019 3 June 2019.

4.37 Use of Office Premises

4.37.1

A Trading Member must not allow any unauthorised person to use, or operate out of, its office premises.

Added on 3 June 2019 3 June 2019.

4.38 Soft Dollar Commissions

4.38.1

A Trading Member and its Trading Representatives may receive goods and services from a broker for directing business to the broker if:

(a) the goods and services can reasonably be expected to assist in the provision of services to the customer;

(b) records of the goods and services received are maintained; and

(c) there are appropriate internal controls and procedures for such arrangements.

Refer to Practice Note 4.38.

Added on 3 June 2019 3 June 2019.

4.38.2

A Trading Member may pay for goods and services to customers for directing business to the Trading Member if:

(a) records of such payments are maintained;

(b) there are procedures to control such arrangements; and

(c) the arrangements do not violate any law, regulation or professional code of ethics on the part of the recipients.

Refer to Practice Note 4.38.

Added on 3 June 2019 3 June 2019.

4.39 Research and Corporate Finance Activities

4.39.1

This Rule shall not apply to a Remote Trading Member.

Added on 3 June 2019 3 June 2019.

4.39.2

Permissible Activities

(a) A Trading Member must inform SGX-ST at least 14 days before engaging in research or corporate finance activities.

(b) The research department of a Trading Member may engage only in the following types of activities:

(i) research and analysis on securities or futures contracts (including recommendations, if any); or

(ii) such other activities as SGX-ST approves.

(c) The corporate finance department of a Trading Member may engage only in the following types of activities:

(i) management, underwriting and placement of initial public offering or rights issues of securities;

(ii) advice on acquisition and disposal of securities and assets;

(iii) advice on corporate or debt restructuring; or

(iv) advice on take-over offers, if the Trading Member has relevant expertise and experience; or

(v) any other activity as SGX-ST may approve.

(d) A Trading Member and its staff undertaking research or corporate finance activities must procure and maintain any applicable licences and notify SGX-ST prior to engaging in the relevant activities, and shall maintain such licences while undertaking those activities, unless otherwise exempt from licensing.

(e) SGX-ST may limit the scope, or direct the cessation, of the Trading Member's research or corporate finance activities if the Trading Member fails to comply with this Rule 4.39 or if, in SGX-ST's opinion, the relevant activities are detrimental to the financial integrity, reputation or interests of, or organised markets established or operated by, SGX-ST. The Trading Member may, within 14 days of being notified of SGX-ST's decision, appeal in writing to the SGX RegCo Board, whose decision will be final.

(f) A Trading Member must supply SGX-ST with any information that SGX-ST requires regarding its research or corporate finance activities.

Added on 3 June 2019 3 June 2019.

4.39.3

Supervision of Staff

(a) A Trading Member must:

(i) supervise its staff undertaking research or corporate finance activities;

(ii) implement written supervisory procedures to ensure that its staff undertaking research or corporate finance activities comply with this Rule 4.39; and

(iii) implement any procedure or recommendation issued by SGX-ST.

(b) A Trading Member shall be responsible for the acts or omissions of its staff undertaking the relevant activities.

(c) SGX-ST may limit the scope of activity of a staff member undertaking research or corporate finance activities or direct a Trading Member to replace the staff member if the person:

(i) causes the Trading Member to breach the Rules;

(ii) engages in conduct detrimental to the financial integrity, reputation or interests of SGX-ST, or organised markets established or operated by SGX-ST;

(iii) is convicted of an offence involving fraud or dishonesty or is found by a court of law to have acted fraudulently or dishonestly, in each case whether in or out of Singapore; or

(iv) is the subject of an investigation involving fraud or dishonesty whether in or out of Singapore.

(d) A Trading Member may, within 14 days after it is directed by SGX-ST to replace a staff member, appeal in writing to the SGX RegCo Board whose decision will be final.

Added on 3 June 2019 3 June 2019.

4.39.4

Effective Controls and Segregation of Duties

(a) A Trading Member must ensure effective controls and segregation of duties and separation between its research department and its corporate finance department and between each of them and its dealing and back office departments. Separation between departments means at least having the following:

(i) separate reporting lines in place for each of the different departments;

(ii) adequate restriction of communication and information flow, particularly non-public information, between the different departments;

(iii) adequate processes and procedures to identify, avoid, minimise, manage or mitigate any conflict of interest or potential conflict of interest between the different departments;

(iv) bonus, salary or other forms of compensation to a research staff member not being based on any corporate finance or dealing transaction; and

(v) access into the corporate finance department being restricted only to corporate finance staff members and any other authorised staff member.

(b) SGX-ST may require the Trading Member to implement controls and procedures to ensure proper segregation under Rule 4.39.4.

Added on 3 June 2019 3 June 2019.

4.39.5

Staffing

A Trading Member shall ensure that its staff undertaking the research or corporate finance activities have an adequate headcount and possess relevant expertise and experience.

Added on 3 June 2019 3 June 2019.

4.39.6

Setting of Limits

A Trading Member's underwriting commitment limits must be set by its senior management staff independent of the corporate finance and dealing departments.

Added on 3 June 2019 3 June 2019.

4.39.7

Investment Recommendations

A Trading Member and its staff undertaking research activities must:

(a) have an adequate basis, supported by research, for making an investment recommendation;

(b) maintain independence and objectivity in producing a research report or making an investment recommendation; and

(c) not issue a research report or make an investment recommendation that is not consistent with its relevant staff's actual views regarding a subject company.

Added on 3 June 2019 3 June 2019.

4.39.8

Records

A Trading Member must maintain records of its research report or investment recommendation for seven years.

Added on 3 June 2019 3 June 2019.

4.39.9

Disclosure

A Trading Member and its staff undertaking research activities must disclose:

(a) any interest at the date of the dissemination of the research report or investment recommendation in the subject of the report or recommendation. "Interest" includes direct or indirect ownership of securities or futures contracts (excluding the amount of securities or futures contracts owned), directorships, trustee positions, customer of the Trading Member or any other relationship that may be regarded as creating a potential conflict of interest with the Trading Member's responsibility under Rule 4.39.7(b); and

(b) any monetary compensation (excluding salary and bonuses) or other benefits receivable in respect of the research report or investment recommendation.

Added on 3 June 2019 3 June 2019.

4.39.10

Trade Restrictions for Trading Member Undertaking Research

A Trading Member and its staff undertaking research activities must not:

(a) knowingly buy or sell a security or futures contract if the Trading Member or its staff has material information not generally available to the public in relation to the security or futures contract;

(b) except on instructions from a customer, knowingly buy or sell a security or futures contract if the transaction may create a conflict of interest in relation to the Trading Member's duty to its customers;

(c) procure any person to buy or sell a security or futures contract if the Trading Member or its staff is prohibited under Rules 4.39.10(a) or (b) from doing so; and

(d) buy or sell a security or futures contract contrary to the most recent research report published by the Trading Member, unless sufficient time has passed since the report's publication for the market to react to the information. This trading restriction does not apply:

(i) to the Trading Member if the Trading Member is acting on a customer's express instructions;

(ii) to the Trading Member and its staff undertaking research activities if significant news is announced that would change the research report or investment recommendation; or

(iii) to a staff member undertaking research activities if the staff member is in financial difficulty and must sell the security or futures contract. The Trading Member must maintain documentation of the staff member's financial condition;

(iv) to the Trading Member if the proprietary desk of the Trading Member had no knowledge of the report and its contents before it was issued.

Added on 3 June 2019 3 June 2019.

4.39.11

Trade Restrictions for Trading Member Undertaking Corporate Finance

(a) A Trading Member undertaking corporate finance activities must maintain a restricted list of securities on which its corporate finance department is working.

(b) A security must be moved onto the restricted list no later than the date the deal is mandated.

(c) If circulated, the restricted list may be circulated to only the following persons:

(i) corporate finance staff and the person to whom the head of corporate finance reports; and

(ii) Trading Representatives who are authorised to deal for the Trading Member's accounts and the head to whom these Trading Representatives report.

(d) Staff who are privy to the restricted list must not deal in securities listed therein, or in any derivative of such securities, either for the Trading Member's account, their own accounts or accounts over which they have control and influence.

Added on 3 June 2019 3 June 2019.

4.40 Application of Chapter 4 to Remote Trading Member

4.40.1

A Remote Trading Member shall comply with such requirements established by the Relevant Regulatory Authority, if any, and principles of good business practice in relation to the areas covered by the Rules in Chapter 4 that have been expressed to not apply to Remote Trading Members.

Added on 3 June 2019 3 June 2019.