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Buy-in penalties, quarterly reporting targeted in sweeping review of SGX rules

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Helped by plenty of month-ending window dressing, Friday's session at Singapore Exchange (SGX) brought plenty of relief to battered stocks here, with the Straits Times Index (STI) surging 66.66 points or 2.6 per cent to 2,629.11.

SINGAPORE Exchange (SGX) is looking into a raft of potential changes to the structure of the stock market, including scrapping automatic penalties for buy-ins, reviewing its calculation of the minimum trading price (MTP) and studying the need for quarterly reporting and dual-class shares, chief executive Loh Boon Chye announced on Thursday.

Within the next month, the market operator will no longer charge a penalty by default when investors who short-sell a stock fail to deliver the shares for settlement. This is in recognition of the fact that most cases of buy-ins are due to first-time short-sellers and are of small value, Mr Loh said.

Following feedback from the market, SGX is also reviewing the way that it will calculate the MTP for mainboard-listed companies. The MTP, which will take effect between March and September this year, is currently set at a six-month historical volume-weighted average price of 20 Singapore cents, unadjusted for stock splits and share consolidations. Mainboard-listed companies that trade below the MTP will be put on a watch-list for possible delisting.

SGX has also set up a team to review the need for quarterly reporting and dual-class shares. For dual-class shares, the exchange is currently waiting for advice from the independent Listings Advisory Committee.

In terms of new issues, a current proposal for a minimum retail allocation of 5 per cent for mainboard initial public offerings is under review, Mr Loh said. SGX is examining whether the retail allocation should be higher.

"Some of you may question this given current market conditions," Mr Loh said. "But what this initiative aims to do is building for the future."

Mr Loh also acknowledged that there have been many regulatory changes, both recently and to come. Recognising that "too many changes in a relatively short time can be detrimental or counterproductive", Mr Loh said SGX and the Monetary Authority of Singapore (MAS) have agreed to allow six to 12 months between the implementation of major initiatives.

In that light, implementation of a 5 per cent collateral requirement for all securities trading - which will mark the end of uncollateralised contra trading - will be pushed to 2018.

Beyond regulations, SGX has also teamed up with the Institute of Banking and Finance (IBF), the national accreditation and certification agency for financial-sector jobs, to provide training courses for remisiers and dealers aimed at uplifting the skills in the profession. IBF has also created a new set of competency standards for those trading representatives.

Trading representatives will also receive some respite from MAS.

MAS deputy managing director Ong Chong Tee said on Thursday the financial-sector regulator plans to exempt trading representatives from certain business conduct requirements that are more pertinent for financial advisers. The change is expected by the middle of 2016.