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Singapore authorities propose collateral requirements for contra trading

SINGAPORE, Feb. 7 (Xinhua) -- The Monetary Authority of Singapore (MAS) and Singapore Exchange (SGX) proposed on Friday that securities intermediaries impose minimum collateral requirements on their customers for contra trading in securities, in a bid to reduce credit risk exposures of market participants.

The minimum collateral requirements should be "based on the customers' open positions and credit risk management practices," the authority and the bourse said in a press release.

"Having carefully considered the various views expressed against and in support of contra trading, MAS and SGX have concluded that the focus should instead be on reducing the credit risk exposures of market participants," they said.

Contra is the buying or selling of stocks without having to pay for the cost of the stocks. Once the punters buy the stocks on contra, they will have to either pay for the contract value or sell their shares and settle the difference between the buying and the selling prices within three days.

The SGX said it also intends to shorten the settlement cycle from three days to two.

It was only one of the proposals made by the MAS and the SGX to promote orderly trading and responsible investing in Singapore- listed stocks.

They said they are also considering the possibility of setting a minimum trading price for issuers listed the mainboard.

"Low-price securities are generally associated with high volatility, which in turn makes them more susceptible to speculation and potential market manipulation," they said.

The bourse and the regulator also proposed a short position reporting regime with two options, namely aggregate position reporting or disclosure of significant individual short positions.

They also proposed measures to strengthen the listing framework, such as the establishment of an independent Listings Advisory Committee to consider listing policy issues and listing applications that meet specific criteria.

They also proposed to establish an independent Listings Disciplinary Committee and Listings Appeals Committee. It is also proposed that the range of regulatory sanctions for listing rule breaches be expanded to include powers to impose fines, restrict the activities that issuers may undertake, and to make offers of compositions for minor and technical breaches.

Interested parties have until May 2 to submit their views and comments.

Separately, the SGX also announced several new rules that take effect from March 3, including publication by the bourse operator of a "trade with caution" announcement whenever a company is unable to explain unusual trading activities. The listed firm's board of directors will be required to approve the company's reply to a public query by the bourse.

"Today's world is fast-changing and we need to strengthen Singapore's securities market to meet the expectations of investors and companies," said Magnus Bocker, chief executive officer of SGX.

The Monetary Authority said Singapore's stock market is fundamentally sound and the consultation is aimed at initiating a conversation with stakeholders to strengthen regulations.

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