Practice Note 11.1.2 and 11.3 Trade Cancellation Procedures

1.1

Rule 11.1.2 states that SGX-ST may cancel a contract in various circumstances including the following:

(a) if the contract arises from an Error Trade and:

(i) the Trading Members to the contract agree to the cancellation; or

(ii) SGX-ST is satisfied that the contract should be cancelled; and

(b) if the contract arises from a Trade at Close and subsequent to the trade, SGX-ST:

(i) invalidates the Closing Auction Price on which the trade is based; or

(ii) determines an alternate closing price for the security.

Added on 3 June 2019 3 June 2019 and 3 June 2019 3 June 2019.

1.2

Rule 11.3 sets out the procedures for the cancellation of Error Trades. This Practice Note further sets out the steps that a Trading Member should take if it wishes to cancel an Error Trade.

Added on 3 June 2019 3 June 2019 and 3 June 2019 3 June 2019.

1.3

This Practice Note also sets out the procedure when SGX-ST cancels a contract arising from a Trade at Close.

Added on 3 June 2019 3 June 2019.

2. Cancellation Procedures for Error Trades

2.1.1

Rule 11.2.1 states that an "Error Trade" refers to a trade that is executed on the Trading System and that results from:

(a) An erroneous entry in relation to the price and/or volume of an order; and/or

(b) An erroneous entry in relation to the name of the securities or futures contracts.

Added on 3 June 2019 3 June 2019 and 3 June 2019 3 June 2019.

For the purpose of this Practice Note, the party that caused the Error Trade will be referred to as the "TM in error"; any counterparty to the Error Trade will be referred to as a "counterparty TM"; and both parties will be referred to collectively as the "parties".

Added on 3 June 2019 3 June 2019 and 3 June 2019 3 June 2019.

2.2 Preliminary Steps

2.2.1

When an Error Trade occurs, the TM in error must:

(a) Inform SGX-ST by telephone at (+65) 6713 7088 within 30 minutes from the time the Error Trade occurred; and

(a) Contact the counterparty TM(s) without delay and seek its(their) agreement to cancel the Error Trade.

Added on 3 June 2019 3 June 2019 and 3 June 2019 3 June 2019.

2.2.2

Both the TM in error and the counterparty TM(s) must take all necessary steps to minimise any likely market impact caused by the Error Trade.

Added on 3 June 2019 3 June 2019 and 3 June 2019 3 June 2019.

2.2.3

Rule 11.4.1 gives SGX-ST the discretion to review any Error Trade if SGX-ST deems it necessary for the proper maintenance of a fair and orderly market. As such, market participants are advised that even if they do not initiate the procedure for cancelling an Error Trade, SGX-ST may exercise its discretion under Rule 11.4.1 to review the Error Trade.

Added on 3 June 2019 3 June 2019 and 3 June 2019 3 June 2019.

2.3 Cancellation Procedures

2.3.1

Upon being notified by a TM in error of an Error Trade, the counterparty TM must contact all its affected clients to:

(a) inform them of the Error Trade and seek their instructions on the cancellation of the Error Trade;

(b) inform them on the possibility that the Error Trades may be referred by the TM in error to SGX-ST for review and may be cancelled upon the conclusion of the review; and

(c) inform them not to close their position until the issue has been resolved.

Added on 3 June 2019 3 June 2019 and 3 June 2019 3 June 2019.

Mutual cancellation

2.3.2

In the event that the parties agree to cancel an Error Trade, the following procedures will apply:

(a) The TM in error must inform SGX-ST of the mutual cancellation without delay; and

(b) Both parties must submit the duly completed trade cancellation request forms to SGX-ST.

Added on 3 June 2019 3 June 2019 and 3 June 2019 3 June 2019.

2.3.3

If the counterparty TM agrees to cancel an Error Trade, the TM in error should consider compensating, on an ex gratia basis, the counterparty TM for any losses that would be incurred as a result of the mutual cancellation.

Added on 3 June 2019 3 June 2019 and 3 June 2019 3 June 2019.

No mutual cancellation

2.3.4

If the parties cannot mutually agree to cancel the Error Trade, the TM in error may submit a written request to SGX-ST to review the Error Trade.

Added on 3 June 2019 3 June 2019 and 3 June 2019 3 June 2019.

2.3.5

In making the request to SGX-ST to review an Error Trade, the TM in error must:

(a) refer the matter to SGX-ST within 60 minutes from the time the Error Trade occurred or before 18:00 hours on the day the Error Trade occurred, whichever is earlier; and

(b) notify the counterparty TM that it has referred the matter to SGX-ST for review.

Added on 3 June 2019 3 June 2019 and 3 June 2019 3 June 2019.

2.3.6

In a situation where multiple counterparty TMs are involved in an Error Trade and some agree to a mutual cancellation while the others do not, the TM in error must notify all the counterparty TMs of any referral to SGX-ST for review.

Added on 3 June 2019 3 June 2019 and 3 June 2019 3 June 2019.

2.3.7

If a TM in error makes a request to SGX-ST to review an Error Trade, the counterparty TM must provide the TM in error and SGX-ST with its reasons for not agreeing to a mutual cancellation of the Error Trade.

Added on 3 June 2019 3 June 2019 and 3 June 2019 3 June 2019.

2.3.8

The timeframe referred to in paragraph 2.3.5 for the TM in error to make the request to review an Error Trade is to minimise the impact of any cancellation on the market. In this regard, SGX-ST reserves the right not to facilitate any request to review an Error Trade if SGX-ST receives the request after the said timeframe.

Added on 3 June 2019 3 June 2019.

2.4 Review Procedures

2.4.1

A TM in error must pay a non-refundable trade review fee of S$1,000 for each referral accepted for review by SGX-ST, regardless of the outcome of the review.

Added on 3 June 2019 3 June 2019 and 3 June 2019 3 June 2019.

2.4.2

In its referral to SGX-ST for review, the TM in error shall provide details of:

(a) the name of the counter to which the Error Trade pertains;

(b) the price and volume at which the Error Trade was done;

(c) the timestamp of the Error Trade;

(d) the Trade ID; and

(e) the reasons for the erroneous entry in relation to the Error Trade.

Added on 3 June 2019 3 June 2019 and 3 June 2019 3 June 2019.

2.4.3

Once SGX-ST has reviewed an Error Trade, SGX-ST will inform the market of the outcome of the review (i.e. whether the Error Trade remains valid or has been cancelled) through various media which may include but not be limited to the use of market broadcast and publication on any website by SGX.

Added on 3 June 2019 3 June 2019 and 3 June 2019 3 June 2019.