Monetary Authority of Singapore Consults on Regulations for Short Selling

Transcription

1 January 12, 2017 SIDLEY UPDATE Mnetary Authrity f Singapre Cnsults n Regulatins fr Shrt Selling On December 14, 2016, the Mnetary Authrity f Singapre (MAS) issued a Cnsultatin Paper n Regulatins fr Shrt Selling (Cnsultatin Paper). The Cnsultatin Paper seeks t intrduce requirements t enhance transparency n the level f shrt selling in securities listed n Singapre s apprved exchanges 1. Market participants will be required t specifically mark shrt sell rders t the relevant exchange 2 and reprt shrt psitins abve specific threshlds t MAS. The apprved exchanges will publish aggregate infrmatin n shrt sell rders and shrt psitins. These new requirements frm part f the Securities and Futures (Amendment) Bill 2016, and further details are set ut in the draft Securities and Futures (Shrt Selling) Regulatins 2017 (Regulatins) and the draft Guidelines n the Regulatin f Shrt Selling (Guidelines) attached as Annex B and Annex C f the Cnsultatin Paper, respectively. This briefing summarizes the prpsals relating t these new requirements n shrt selling. Key prpsals A summary f the key prpsals in the Cnsultatin Paper is set ut belw. 1. Scpe f disclsure and reprting requirements Requirements t mark shrt sell rders and reprt shrt psitins will apply nly t specified capital markets prducts, i.e.: shares f a crpratin whse primary listing is n an apprved exchange shares f a crpratin whse secndary listing is n an 1 Currently, Singapre s apprved exchanges refer t Singapre Exchange Securities Trading Limited, Singapre Exchange Derivatives Trading Limited and ICE Futures Singapre Pte. Ltd. 2 This gives statutry backing t Singapre Exchange Limited s (SGX) current trading rules n shrt rder marking, where shrt sell rders are required t be marked befre submitting such rders t SGX. Sidley Austin prvides this infrmatin as a service t clients and ther friends fr educatinal purpses nly. It shuld nt be cnstrued r relied n as legal advice r t create a lawyer-client relatinship. Attrney Advertising: Fr purpses f cmpliance with New Yrk State Bar rules, ur headquarters are Sidley Austin LLP, 787 Seventh Ave., New Yrk, NY 10019, ; 1 S. Dearbrn, Chicag, IL 60603, ; and 1501 K St., NW, Washingtn, DC 20005,

2 Page 2 apprved exchange where the shares f the crpratin a cnstituent f an index specified in the Secnd Schedule 3 f the Regulatins; r the crpratin is specified in the Third Schedule 4 f the Regulatins. 2. Disclsure requirements n shrt sell rders (similar t current market practice) When a market participant (A) places a shrt sell rder thrugh his brker, he will be required t disclse t the brker that the rder is a shrt sell rder befre r at the time f the rder. The brker shuld enter the rder nly after A has disclsed t him whether the rder is a shrt sell rder r a nrmal sell rder, as the brker will in turn be required t disclse the same t the apprved exchange befre r at the time f the rder. Where market participants wn sme but nt the full quantity f securities t be sld, such partial shrt rders will be required t be split int tw separate rders, with the shrt sell rder marked accrdingly. The apprved exchanges will be required t publish, befre the start f each trading day, the aggregate vlume f shrt sell rders matched and executed n the preceding trading day and in respect f each specified capital markets prduct. Bth designated and registered market makers will be exempted frm the requirement t mark shrt sell rders in respect f their market making activities. 3. Reprting requirements n shrt psitins (new requirement) A reprtable shrt psitin will be defined as a shrt psitin that is equivalent t r mre than the lwer f the fllwing threshlds (Shrt Reprting Threshlds): 0.05 percent f the utstanding shares in the relevant class f shares f the crpratin S$1,000,000 in aggregate value f the utstanding shares in the relevant class f shares f the crpratin The shrt psitin, regardless f whether the psitin has been settled, shuld be calculated n the last day f each calendar week (typically a Friday) that the apprved exchange is pen fr trading in the relevant 3 At this pint, the Secnd Schedule will specify nly the FTSE Straits Times Index. 4 At this pint, the Third Schedule will nt specify a crpratin.

3 Page 3 class f shares f the crpratin (psitin day). Derivatives will be excluded fr the purpses f calculating a shrt psitin. The reprting bligatins will be impsed nly n the immediate legal wners f the shares and nt the beneficial wners r cntrllers f the shares. Designated market makers will be exempted frm reprting shrt psitins acquired in the curse f their market making activities. MAS seeks cmments n whether registered market makers shuld be required t reprt shrt psitins. A shrt psitin hlder will be permitted t get an agent t reprt the shrt psitins n his behalf. A persn wh has a reprtable shrt psitin will be required t reprt his shrt psitin t MAS tw business days after the psitin day. The shrt psitin reprt will be required t be ldged with MAS via the Shrt Psitin Reprting System (SPRS) n MAS website. 4. Flexibility fr institutinal participants with multiple trading desks in reprting aggregate rders and psitins Institutinal participants with multiple trading desks will be permitted t chse whether t aggregate their rders and psitins n a legal entity basis r trading desk basis fr shrt psitin reprting purpses. Where an institutinal participant chses nt t aggregate rders and psitins n a legal entity basis, rders and psitins shuld be aggregated at the highest pssible level where trading decisins share the same influence (e.g., same prtfli manager). The cnsideratins determining the level f aggregatin must be dcumented, and the rders and psitins must nt be duble cunted fr reprts. Reprting must be made n a cnsistent basis. Fr example, an institutinal participant shuld nt be aggregating n a trading desk basis in ne reprting perid and n a legal entity basis in the next reprting perid when trading decisins are cnsistently made at a trading desk level. Where an institutinal participant chses t aggregate rders and psitins n a trading desk basis, trading desks will be required t reprt all shrt psitins, even if the shrt psitins at the individual trading desk level d nt exceed the Shrt Reprting Threshlds. T reprt shrt psitins n a trading desk basis, institutinal participants will be required t register and set up separate reprting

4 Page 4 identities in SPRS fr each trading desk. Changes in hw shrt psitins are aggregated shuld be accmpanied by new reprting identities fr each new level f aggregatin. 5. Flexibility fr investrs with multiple fund managers in reprting aggregate rders and psitins Investrs with funds managed by multiple fund managers with separate discretinary mandates will be permitted t chse whether t aggregate their rders and psitins at the investr s level r fund manager s level fr shrt psitin reprting purpses. Orders and psitins must nt be duble cunted fr reprts. Reprting must be made n a cnsistent basis. Fr example, an investr shuld nt be aggregating at his level in ne reprting perid and at the fund manager s level in the next reprting perid. Where an investr chses t aggregate rders and psitins at the fund manager s level, fund managers will be required t reprt all shrt psitins, even if the shrt psitins at the fund manager s level d nt exceed the Shrt Reprting Threshlds. 6. Implementatin timeline The finalized Regulatins will be published fur mnths befre they take effect. SPRS will be made available n MAS website in Q fr vluntary reprting and t allw market participants t begin registering accunts and familiarize themselves with the system befre the reprting requirements cme int frce. Invitatin fr Cmments Please refer t the Cnsultatin Paper fr the cmplete set f prpsals as well as the list f cnsultatin questins, which can be fund here. The deadline fr cmments and feedback t be submitted t the MAS is January 27, We are cllating cmments frm clients and industry participants fr submissin t the MAS. If yu have any cmments n the prpsals that yu wuld like us t submit n yur behalf, please cntact Han Ming H ( , hanming.h@sidley.cm) r Jsephine Law ( , jlaw@sidley.cm). If yu have any questins regarding this update, please cntact the Sidley lawyer with whm yu usually wrk r Han Ming H Partner hanming.h@sidley.cm Jsephine Law Cunsel jlaw@sidley.cm

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