Asia may follow SGX in short position reporting rule

New rules mandating the reporting of short positions in Singapore could set a precedent for other Asian bourses, says a Hong Kong-based hedge fund counsel.

“The danger is a good idea can become contagious," said the source, who preferred to remain anonymous. "If Singapore starts doing that and follows Hong Kong, it sets a strong example for the rest of Asia. Malaysia, Indonesia and the Philippines may jump on board."

By mid-2016, investors holding either 0.05% of issued shares in a company, or shares worth S$1 million in a listed entity (whichever is lowest) will be required to publish their aggregated short positions weekly.

“Although people say it’s just making a few mouse clicks and uploading a file, it’s still work,” the counsel said. “A lot of the [larger] fund managers will add it to the list of things for operations staff to do, but if you are in a lean team you have more work to do.”

The Monetary Authority of Singapore (MAS) and Singapore Exchange (SGX) said they would seek feedback from industry participants on reporting requirements, including how short positions should be calculated and the reporting format, before implementing the new regime.

Hong Kong introduced the reporting of short positions in June 2012. Other new rules announced in a joint statement by MAS and SGX last week include a requirement for stocks to trade at a minimum of S$20 cents ($0.16), or risk being delisted from the main board.

More than 200 stocks of the 600 listed on the exchange could be affected by the new rule.

The move, intended to tackle speculation and market manipulation in penny stocks, follows plunges in the share prices of resources companies Blumont Group, Asiasons Capital and LionGold in October last year.

The three companies’ combined market value dropped S$8.7 billion ($7 billion) in the month.

Shares trading below the threshold will be placed on a watch list, with companies given 36 months to take action before being delisted.

MAS and SGX are considering setting up a facility to allow the trading of delisted shares, although they questioned the commercial viability of such a project because of limited demand and post-trade settlement difficulties, including the transfer of delisted shares.

In further changes, securities intermediaries will be required to collect 5% of collateral from their customers for the leveraged trading of listed securities, and three independent committees will be established covering disciplinary action and appeals for listings. By the end of this year, the size of board lots will be reduced to 100 shares, from 1,000.

The new rules come after a consultation paper on the changes was published in February.