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Short selling banned on SGX

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Now that’s something I didn’t know:

SOME investors rushing back into the red-hot market have been caught out by new rules on short-selling and heavily fined for selling shares that they did not actually own.

They have been told by the Singapore Exchange (SGX) to pay fines of $1,000 or more within five days of failing to settle their trades.

The penalties were introduced last September to deter ‘naked’ short-selling during a period of near panic on global bourses.

Such short-selling occurs when a trader sells a stock he does not own or has not borrowed in the hope that the price will fall. This would allow him to pocket the difference.

But the SGX appears to be catching an increasing number of ‘innocent’ investors who fail to deliver small quantities of shares when a trade is due to be settled three days after it is transacted. The trades are usually 1,000 or 2,000 shares of a blue chip like DBS Bank or SingTel.

Written by defennder

May 17, 2009 at 10:15 PM

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