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New MAS rules on short-selling, short-position reports to kick in on Oct 1

INVESTORS with short positions above a certain threshold will soon have to report them to the Monetary Authority of Singapore (MAS), and not just the bourse operator.

The move, announced on Monday, will affect investors with a short position of at least 0.2 per cent of total issued shares or units or at least S$2 million - whichever is lower - who are trading in securities listed on the Singapore Exchange (SGX).

The MAS said the move - which takes effect on Oct 1, 2018 - "will improve transparency on short-selling activities in the securities market and enable investors to make more informed trading decisions".

Short-selling refers to selling securities - such as shares, units or structured warrants - that a trader does not actually own at the time of the sale.

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The selling may be "covered", with the seller having borrowed the securities or made arrangements to deliver them.

It may also be "uncovered" or "naked", which is when the seller neither holds the securities nor has made arrangements to deliver them to the buyer.

The MAS said that it will publish aggregated short positions for each security every Wednesday, without disclosing the identities of the short sellers.

Traders who meet the threshold must report their positions through an online portal, dubbed the Short Position Reporting System, at https://eservices.mas.gov.sg/sprs/

The SGX already requires investors to mark sell orders as "long" or "short" and publishes both daily and weekly reports on short-selling activity. This rule has been in place since March 11, 2013.

The new MAS requirements, which get their teeth from the Securities and Futures (Short Selling) Regulations 2018, will "provide statutory backing to SGX's trading rules", the state regulator said.

Short-selling is not banned in Singapore, but failure to settle a trade will earn penalties under the central depository clearing rules.

"Abusive" short-selling - for example, with the spread of false rumours - could also be prosecuted as market manipulation or deception under the Securities and Futures Act.

"But not everyone in the industry is a fan of the change. Jimmy Ho, president of the Society of Remisiers, called the new requirements "a hassle for investors". "Its onerous because, if there needs to be a report, currently we need to report to the SGX," he told The Business Times over the phone. "So why report to the MAS again? Why can't the two systems be linked?"