Traders are required to report their short selling positions through MAS’ new online portal SPRS.
On 28 May, the Monetary Authority of Singapore (MAS) announced that it is requiring investors to report their short positions and short sell orders in securities that are listed on the Singapore Exchange (SGX). The rationale behind the new rule, which will take effect on 1 October this year, according to MAS, is to improve the transparency on short selling activities in the securities market and enable investors to make more informed trading decisions.
What’s the new rule all about?
Investors who are engaging in trading activities of at least 0.2% of total issued shares or units or at least $2m in securities listed on SGX are required to report to MAS through a new online portal, the Short Position Reporting System (SPRS). In line with transparency and information dissemination, MAS noted that it will publish aggregated short positions of each security on Wednesday of each week.“the new rules will also provide statutory backing to SGX’S trading rules which already require securities brokers and banks to flag all investor short sell orders to the exchange,” according to MAS, adding that there will be no change to the current arrangement for investors to inform their brokers when they submit short sell orders.
Some of the products that will be affected by the new rule from MAS include shares, units in a business trust, and units in a real estate investment trust (REIT) that are listed on the SGX, according to analysis from Allen Overy. The rule basically applies to both primary and secondary listings on shares.
Kai Loon Loh, counsel at Ashurst Singapore, said in a company paper about the new MAS ruling that there remain some clarifications, and interesting questions, as to whether stapled securities are covered by the Short Selling Regulations.“for example, if a stapled security consists of a unit in a REIT and a unit in a business trust, one would expect the stapled security to be caught by the short selling rules,” he noted in the company paper. “However, if the stapled security consists of a share and a note, then it becomes less clear-cut.”
“Accordingly, where an investor has other persons making trades on his behalf, he remains responsible for reporting the short position although he may delegate the task to these other persons,” the Allen Overy analysis pointed out. “Unlike the requirement to disclose short orders, there is no exemption for market makers.”
But when should these investors and registered representatives report these short positions and short selling activities? According to Allen Overy, the reporting of the short position must be done within two working days after the position day. Ordinarily, therefore, this will be the following Tuesday, but it depends on the actual position transaction.
As MAS’ new rule will only take effect at the beginning of October this year, affected firms and stakeholders will have at least a month to prepare for the repercussions in their operations and business dealings. According to Ashurst’s Loh, Singaporean businesses and firms can prepare by focussing on various action points and implementation decision-making processes. These include working out when is a sell order a “short sell order” and how to determine “short positions”; working out how to perform the relevant calculations to determine whether the short position threshold has been breached; applying to the
MAS to be registered as an account holder of the SPRS; and having in place the operational processes to monitor and disclose short sell orders/report short positions in a timely fashion.
It will also be extremely helpful if Singaporean businesses can start considering whether to disclose/report at a trading desk level, fund manager level, or trust level
(as applicable) or on an aggregate basis, whilst setting up the infrastructure to report short positions, or creating the necessary user accounts like how many and at what level, for instance, and familiarising with the functionalities of the SPRS to avoid confusion and errors.
Whilst the rationale behind the MAS ruling was straightforward in a sense that it aims to improve transparency in the securities market in the city-state, not everyone is convinced that it makes life easier. President of the Society of Remisiers Jimmy Ho, noted in a separate interview, that the new requirement presents a hassle to investors because it doubles their reporting work since, according to him, they already report to SGX— questioning the need to report to MAS and presenting the case of why can’t the two organisations be linked in their systems instead.
The rule basically applies to both primary and secondary listings on shares.
A new online portal is dedicated for the reporting of short positions
Kai Loon Loh