28 June 2018
With effect from 1 October 2018, a new legislative framework will be introduced in the Securities and Futures Act (“SFA”) for the disclosure of short sell orders and reporting of short sell positions, giving statutory effect to the requirements for the marking of short sell orders that are currently found in the Singapore Exchange Securities Trading Limited (“SGX-ST”) Rules. Short selling is the sale of capital markets products that the seller does not own at the time of the sale.
In a nutshell
With effect from 1 October 2018, where a short sell order is made on an approved exchange, either the person who places the short sell order, or the broker who places the short sell order on his behalf, must disclose to the approved exchange that it is a short sell order. Persons who hold short positions in specified capital markets products which exceed the prescribed short position threshold on position day must report them to the Monetary Authority of Singapore (“MAS”).
New legislative framework for disclosing short sell orders and reporting of short sell position
On 1 October 2018, the SFA will be amended to introduce a new Part VIIA in the SFA that sets out the legislative framework for the disclosure of short sell orders and reporting of short sell positions which exceed the prescribed threshold. The Securities and Futures (Short Selling) Regulations 2018 (“Regulations”) supplement the provisions in Part VIIA of the SFA and prescribe, among other things, the capital market products that are subject to the short selling framework (“specified capital markets products”), short position threshold and exemptions for certain market participants from the new regime.
MAS has also issued the MAS Guidelines on the Regulation of Short Selling (SFA 07A-G01) (“Guidelines”) that aim to provide market participants with a better understanding of how MAS administers the legislative framework for short selling disclosures and reporting of short positions.
Disclosure of short sell orders
Where a person (“A”) makes a short sell order on any approved exchange, he must disclose that it is a short sell order to the approved exchange before or at the time of the short sell order. If A makes a short sell order through another person (“B”) (e.g. a broker), A should inform B that the order is a short sell order. In turn, B must, before or at the time of the short sell order, disclose to the approved exchange that the order is a short sell order.
Reporting of short positions
A person is required to report its short positions in any specified capital markets products to MAS, if the short position is equivalent to or exceeds the short position threshold on position day. The short position threshold is the lower of:
- 0.2% of total issued shares in the relevant class of shares or units in the relevant class of units of a business trust or real estate investment trust; or
- S$2,000,000 in aggregate value.
Persons legally responsible for the delivery of specified capital markets products that may result in the short positions are required to report those short positions. In the case of a trust or unit trust, the obligation to report short positions lies with the trustee, and not the manager or the unitholders.
Exemptions from disclosing short sell orders and reporting short positions
Institutional participants with multiple trading desks, investors with multiple fund managers which have discretionary mandates and trustees of trusts/unit trusts are given the flexibility to determine the level at which their orders and positions should be consolidated to meet their short sell disclosure and reporting obligations under the new legislative framework.
Publication of aggregated short sell orders and short positions data
As reporting persons may require some time to improve the accuracy and completeness of the data reported, MAS will monitor the data reported for a period of time after 1 October 2018, before making available the aggregated short sell orders and short positions data to the public, as appropriate.
Background information: MAS Consultation Paper on “Regulations for Short Selling”
Between 14 December 2016 and 27 January 2017, MAS sought feedback on proposals set out in the consultation paper titled “Regulations for Short Selling” relating to the legislative framework for the disclosure of short sell orders and reporting of short sell positions. Drafts of the Regulations and Guidelines were included in the consultation paper. On 28 May 2018, MAS issued its “Response to Feedback Received on Regulations for Short Selling” which sets out comments received on the consultation paper that are of wider interest, together with MAS’ response.
Background information: 2017 Amendment Act
The SFA provisions setting out the legislative framework for the disclosure of short sell orders and reporting of short sell positions will be introduced to the SFA on 1 October 2018 pursuant to the Securities and Futures (Amendment) Act 2017 (“2017 Amendment Act”). On 9 January 2017, Parliament passed the Securities and Futures (Amendment) Bill 2016. The 2017 Amendment Act was gazetted on 16 February 2017.
Apart from implementing the legislative framework for the disclosure of short sell orders and reporting of short sell positions, the 2017 Amendment Act will also implement other changes.
- Securities and Futures (Short Selling) Regulations 2018
- MAS Guidelines on the Regulation of Short Selling
- MAS Response to Feedback Received on Consultation Paper on Regulations for Short Selling