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Singapore Exchange Limited (SGX) is inviting public comments on proposed amendments to its Business Rules, to facilitate the introduction of Single Stock Derivatives (SSDs) in the first quarter of 2008.
SSDs will be a new product class on the SGX Securities Trading (SGX-ST) market. They are exchange-listed derivatives on single underlying securities which are listed or quoted on SGX-ST, and enable investors to buy into an underlying stock at an agreed price on the day of the trade. The trade will then be settled at a future date. The proposed launch is aimed at expanding the current suite of equity derivatives available to investors.
“Single Stock Derivatives will be the first margin-based exchange traded product in our securities trading market. It will enable retail investors to reflect longer-term views, long or short, in the market with transparency and capital efficiency. It will also pave the way for more varied exchange traded equity derivatives products to be introduced and allow for hedging and arbitraging opportunities,” said Mr Chew Sutat, SGX Executive Vice President & Head of Development.
The proposed key features of SSDs are:- Each SSD to have a contract length of two months. For example, an SSD that starts trading on 1 July will have its Last Trading Day on 31 August, if both are trading days.
- Settlement will take place by way of delivery of the underlying securities on the third day after the Last Trading Day (LTD+3). If bought on the first day of the two-month SSD contract (e.g. 1 July), this gives investors up to 65 days to settle the contracts with the actual securities – 62 days longer than for normal securities investments.
- Margins, which are a fraction of the full trade value, are required to be paid to trade SSDs. The full amount of the trade is payable on settlement day, which is LTD+3.
The proposed introduction of SSDs with margins in the securities trading market will involve additions and amendments to the SGX Securities Trading Rulebook, as well as the Central Depository (CDP) Clearing Rulebook.
The consultation paper, which explains the rationale and proposed amendments in detail, will be available on SGX website at http://info.sgx.com/SGXWeb_RMR.nsf/NEWDOCNAME/PC_251007 from today. Market participants and members of the public can forward their feedback and suggestions on the above proposed amendments from today to 15 November 2007 via email and either by post/courier or fax:
Email: rules@sgx.com
Post/Courier: Singapore Exchange Limited2 Shenton Way, SGX Centre 1, #19-00
Singapore 068804
Attn: Glenn Seah
Regulatory Policy
Risk Management & Regulation Group
Fax: 6535 5573
