This follows public consultations in May and December 2002 on amendments to the securities trading rules. The amendments aim to ensure that the rules reflect current market practices.
Alan Shaw, Executive Vice President and Group Head of Risk Management and Regulation, SGX said, "We have consulted widely on the proposed new rules and think that they represent a good balance of controls and commercial realities. The amendments to the securities trading rules will enhance market transparency and better meet the changing needs of both the market place and our Members."
The new securities trading rules will cover only trading members. All provisions pertaining to clearing members will be addressed in the CDP Clearing Rules.
Key amendments include:
1. Principle
The principle of the new securities trading rules is to free up the day-to-day restrictions on members and make them more responsible for what happens in their own operations.
2. New Structure
To make the new rules more user friendly, we have simplified the language and improved its structure by grouping related rules together. We have also removed obsolete rules and proposed changes in line with current market practices.
3. Research
Research and investment analysts with brokerages will no longer be required to register with the Exchange. SGX's securities members will bear full responsibility for the acts of its analysts. SGX, however, reserves the right to stop a member from employing a particular person as its analyst.
A securities member will be required to separate research functions from its dealing, corporate finance and backroom operations. Separation in this context means having separate reporting lines, and other procedures to avoid any conflict of interest.
A securities member and its research analysts will be prohibited from trading a security contrary to the most recent research report published by the member unless three market days have passed since the report was issued. This trading restriction does not apply if the member is acting on a customer's express instructions, or significant news is announced that would change the research report or investment recommendation, or the research analyst is in financial difficulty and must sell the security.
4. Corner
We have rewritten the corner rules to be more flexible, as promised after the Links Island matter. If a corner is declared, the SGX-ST Board instead of the Settlement Committee will decide the fair settlement price. The Settlement Committee will become an advisory committee.
5. Supervisory Rules
We have combined the rules dealing with investigations, inspections and disciplinary proceedings. The disciplinary procedures have also been improved for clarity and fairness. Under the new rules, members can choose to be represented by a legal counsel at hearings.
6. Off-Market Trades
Under the new rules, there will be no trading in suspended securities (or where a trading halt is applied), unless the Exchange, on a case-by-case basis, approves off-market trades. Circumstances under which SGX envisage approving off-market trades include financial difficulty, short-covering, proposed delisting and estate winding up.
7. Corporate Finance
Corporate finance staff of securities members will not need to be registered as trading representatives under the new rules. This will create a level playing field as their counterparts from banks are currently not required to be registered.
8. Remisiers' Agency Agreement
The Exchange will stop prescribing a standard agency agreement format between a securities member and a remisier. The member and the remisier will be left to agree on the terms governing their relationship. The agreement must however address certain minimum conditions such as the amount of commission payable to the remisier and the amount of security deposit to be given by the remisier to the member.
