Traders cry foul from loss on SIA leveraged shorts over ex-right pricing

MANY traders saw their entire positions in the 5x Short Singapore Airlines (SIA) daily leverage certificates (DLCs) go to zero on Wednesday when SIA shares rose more than 20 per cent upon trading ex-rights.

But the short squeeze would not have been as dire as it turned out to be if Societe Generale (SocGen), the issuer of the certificates, had not surprised the market by using what many believe is an aggressive formula to adjust for SIA shares ex-rights, giving traders very little time to hedge their bets in reaction, some traders argue.

At 8.38am on Wednesday, before the market opened at 9am, SocGen announced via a Singapore Exchange (SGX) filing that the theoretical ex-rights price (TERP) of SIA shares based on the previous close would be adjusted to S$3.71, instead of S$4.16 as many had assumed.