Singapore Exchange (SGX) has issued a consultation paper
seeking public feedback on the proposed permanent penalty
framework for non-delivery of securities. For readers who are
keen to read more on the proposed framework, the same may be
accessed from SGX's website at www.sgx.com.sg. This is
preceded by the implementations of SGX on September 22 2008 to
prevent settlement failures of securities and abusive naked
short selling. Short selling is the sale of securities or
commodity futures not owned by the seller (who hopes to buy
them back later at a lower price).
The non-delivery of securities occurs when a market
participant fails to deliver the sold amount of securities by
the settlement date. The proposed tiered penalty framework aims
to penalise when settlement procedures are abused. The
integrity of the securities settlement system and exposed
settlement risks to the Central Depository (Pte) Ltd (CDP)
could be minimised with the proposal being implemented.
A proposed penalty of the higher of 5% of the value of a
failed trade or $1,000 has been suggested by SGX. Market
participants affected by the interruptions may lodge an appeal
with SGX through their broker.
Appeals could be submitted by market participants to SGX in
cases of non-delivery of securities, with genuine mistakes or
other valid reasons being cited. Each of the appeals is
considered individually for the waiver of penalties under
existing arrangements. Similarly, participants who have been
referred to the Disciplinary Committee for failure to deliver
in the buying-in market will have the opportunity to present
their case before the Disciplinary Committee.
Segregation of penalties collected
The monies collected from the revised penalty framework will
be channeled to a segregated account. They do not add to SGX's
revenues, and will be used towards funding or educational
initiatives for market participants.
Proposed amendments to CDP clearing rules
The penalty framework proposal will be implemented under the
CDP Clearing Rules. SGX is also seeking feedback on the
proposed amendments to the rules.