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SINGAPORE : Short-sellers who fail to promptly cover their open positions after short-selling will be slapped with heavier fines - if a proposal by the Singapore Exchange (SGX) goes through.
The regulator has asked for public feedback on a permanent penalty framework for failed share deliveries.
Short-selling is the selling of stocks one does not own, in the hope that one can buy them back at a lower price when the stock falls.
Two months ago, SGX imposed a temporary rule - a short-seller who fails to deliver the securities three days after trade will be fined S$1,000 or 5 per cent of the value traded, whichever is higher.
Now, the bourse regulator wants to make that penalty a permanent fixture in its penalty framework.
Another feature mooted is a much higher penalty of S$5,000 for failure to deliver securities during the procurement period, which is the sixth day after trade. This fine currently stands at S$100 per day per contract.
For short-sellers who fail to cover their open positions by the eighth day after trade, they will be referred to an SGX disciplinary committee.
If the committee finds the party guilty, it will impose a fine of at least S$50,000, depending on the severity of the case.
SGX said the monies received from the penalties will not be added to its revenue, but will be channelled to an account to fund educational initiatives for market participants.
In cases where securities were not delivered due to genuine mistakes or other valid reasons, SGX will consider each appeal on a case-by-case basis. During this period of review, the penalty need not be paid. - CNA/ms
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