SGX Seeks Public Views on Penalties for Nondelivery of Securities

13 November 2008

Singapore Exchange (“SGX”) has today issued a consultation paper seeking public feedback for a permanent penalty framework for failed share delivery. This follows the implementation of measures by SGX in September this year to deter settlement failures of securities and abusive naked short-selling.

The non-delivery of securities occurs when a market participant fails to deliver the soldamount of securities by the settlement date. The proposed tiered penalty framework seeks to administer appropriate penalties when settlement procedures are abused. To reinforce the gravity of how failed share delivery threatens the orderliness of the securities market, SGX proposes for the penalties to be cumulative in nature1. The imposed penalty amount will begin with the initial amount of $1,000 or 5% of the value of the trade (whichever is higher) on all trades that are not delivered.

The penalty amount will progressively build up for persistent non-delivery of securities. The proposed penalty framework is established to protect the integrity of the securities settlement system and minimise exposure of settlement risks to CDP.

Appeal Process Market participants have submitted appeals to SGX in cases of non-delivery of securities, citing genuine mistakes or other valid reasons. For such cases, SGX will continue to consider each individual appeal for the waiver of penalties under existing arrangements2. Participants who have been referred to the Disciplinary Committee for the failure to deliver in the buying-in market will similarly have the opportunity to present their case before the Disciplinary Committee.

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