SGX improves securities settlement to reduce incidence of failed trades

SGX improves securities settlement to reduce incidence of failed trades

09/10/09

Singapore Exchange Limited (SGX) today announced improvements to its clearing and settlement system for securities traded on SGX, to reduce the incidences of non-delivery of securities and imposition of the attendant penalties. These improvements will take effect on 6 November 2009.

SGX has revised the cut-off time for delivery of securities to 12noon on T+3 to allow buyin to be conducted in the afternoon for non-delivered securities to enable market participants to meet their delivery obligations. Only securities that are not successfully bought-in by the end of T+3 will be deemed to have failed.

A summary of the improvements are:

1. Bringing forward securities delivery cut-off time to 12.00pm on T+3

The revised cut-off time for market participants to deliver securities to meet their settlement obligations is streamlined to 12.00pm on T+3. Participants must ensure that they have sufficient securities in their accounts by that time, failing which CDP will conduct buy-in for these securities.

2. Earlier buy-in time on T+3

CDP will conduct the buy-in of undelivered securities on T+3 from 3.00pm to 5.00pm instead of the morning of T+4. This allows identified open positions to be covered before the trade is deemed to have failed and the attendant penalties are imposed.

CDP will publish the list of securities to be bought-in on the SGX website on T+3 at 2.30pm.

To allow market participants to fine-tune their internal processes, SGX will allow a transition period from 6 November to 26 November 2009. The new buy-in time of 3.00pm on T+3 will only take effect on 30 November 2009.

3. Failed trades on T+3

A trade is deemed to have failed if buy-in for the shortfall is unsuccessful by the end of T+3. SGX will impose a penalty of $1,000 or 5% of the value of the failed contract that was not bought in (whichever is higher) at the end of T+3. The existing arrangements for SGX to consider appeals for the waiver of this penalty will continue.

 

4. Continuation of buy-in for failed trades

Buy-in will continue on T+4 and T+5 from 3.00pm to 5.00pm for outstanding undelivered securities at the end of T+3. For failed delivery of securities that cannot be procured after T+5, a penalty of $5000/- each day will apply.

For extended failed delivery of securities after T+7, or for failed delivery of securities in the buy-in market, the matter may be referred to the Disciplinary Committee to decide on the appropriate penalty.