Letter to the Editor, Business Times, November 11, 2015,
Fundamental flaws exist in Mr Vincent Khoo's proposal - as described in his letter "Let remisiers buy-in for clients who short sell by mistakes" ( BT Nov 4) - to allow buying-in of shorted securities from the ready market for delivery one day after T+4. The one-day delay will pose settlement uncertainty for market participants and can undermine the orderly clearing system.
I concur with BT's Oct 30 article "Time to rethink the need for buying-in" and urge Singapore Exchange (SGX) to review the current buying-in market structure and consider opening up the buying-in market to facilitate buying of securities by the retail investors themselves.
The two-hour opening of the buying-in market from 3 PM to 5 PM is inadequate, inefficient and has its shortcomings. Any outstanding or incomplete T+3 buying-in cannot be continued on the following morning.
The interruption causes undue delay and hindrance to complete the process expeditiously. Therefore, the buying-in market should reopen concurrently in the morning with the ready market.
In addition, investors should be allowed to place sell orders to add dynamism. The combined effect of the modification will add liquidity which will lead to better success rate to prevent failed delivery of securities. It will operate like the previous cash market without the creation of a separate platform. Immediate payment and settlement shall apply for this segment of transactions.
The official function of buying-in market shall remain as there will always be a need for enforcement on some short positions.
Opening up the buying-in market will provide additional avenue for seller who need to receive his proceeds earlier. The buyer will get the securities earlier to meet his delivery obligation. It will also facilitate arbitrage opportunities, spread trading, hedging and other cross-trading activities between the two markets. Other direct benefits include increased productivity, saving manpower and office resources that could be directed to better use than to process appeals against penalties for failed delivery.
Overall, it will enhance transparency and the net impact should boost liquidity in the market as well as trading volumes.
Albert Fong Say Kim
November 6, 2015
Friday, 13 November 2015 18:02 albertfong