| SINGAPORE/HONG KONG
SINGAPORE/HONG KONG Oct 11 Several brokerages
in Singapore could lose millions of dollars in the wake of
recent sharp price falls in three stocks, traders said, and as
the stock exchange probes short-selling in two of the stocks
early this week when they were subject to trading curbs.
Singapore Exchange Ltd (SGX), both the market
operator and regulator, suspended trading in shares of Blumont
Group Ltd, Asiasons Capital Ltd and LionGold
Corp Ltd last Friday following the big price moves. On
Sunday, it declared them "designated securities" - its first
such move in five years.
Under the rules imposed by the SGX, traders cannot
short-sell the stocks and buyers have to pay cash up-front. Once
bought, the shares can't be sold until they are deposited into
the buyer's account, at least three days later.
Traders now say there is widespread confusion over the
trading curbs, and particularly over when they were allowed to
sell. Some bought shares after the trading suspension was lifted
on Monday and sold on the same day - so falling foul of the SGX
rules and risking a fine.
"Owing to the confusion, many clients have sold these
securities before the due date," Jimmy Ho Kwok Hoong, President
of The Society of Remisiers (Singapore), wrote in a letter to
The Straits Times on Friday. "They now run the risk of a
possible buying-in with fines for short-selling, unless the SGX
makes an exception to the rule for these trades."
All this comes on top of trading losses racked up when these
three stocks crashed. All have dropped by more than 80 percent
since last Thursday's close, turning them back into the penny
stocks they were before their dramatic gains in recent months -
a surge analysts said was not backed by business fundamentals.
Some brokerage clients have refused to pay up, or have
disappeared, three traders told Reuters on Friday. Individual
traders, or remisiers, who have to foot the bill may have to
declare bankruptcy or sign a bond to pay off what they owe in
installments to the brokerages.
"Because SGX lifted the suspension so quickly (on Monday),
there wasn't time for information to be disseminated down the
stream," said one of the Singapore traders. "The brokers are
further down the food chain than the credit department, and even
the credit department, which has to control the limits, wasn't
really clear about the rules."
It's also unclear how they should now be dealing in the
three companies' shares.
The SGX said late on Thursday it would take appropriate
disciplinary action as part of its investigation into
short-selling of Blumont and Asiasons stocks, though it did not
say what those measures would be.
One trader said the SGX is also asking for the names and
addresses of people using direct market access (DMA) to trade in
the shares. Investors use DMA to electronically trade large
blocks of stock quickly, cheaply and without identifying
themselves to the market.
The SGX, which allowed DMA trading in September 2012, has
the right to request identifying information, but rarely does
so, the trader said. A spokeswoman for the SGX said it is
standard procedure "to call on all our member firms to check on
orders and trades executed in our markets."
Lee Porter, managing director at Liquidnet Asia Pacific,
said such requests are more common in other exchanges. "If
there's any wild swings in prices it's not unusual for
regulators to ask brokers who their underlying customer was," he
The SGX said it uses the "designated securities"
classification when it believes there may have been market
manipulation of a stock, excessive speculation or if it is
otherwise in the market's interest to do so. It said on Thursday
it was monitoring the market in the three stocks, and would lift
the designation "as soon as it is appropriate to do so."
(Additional reporting by Nishant Kumar in HONG KONG; Editing by
Rachel Armstrong and Ian Geoghegan)