False markets: SGX will take action only in big distortions
Singapore Exchange clarifies when it will move against false markets
The Singapore Exchange (SGX) will take regulatory action against false market breaches only if these cases involve larger trading volumes or longer periods of misconduct.
SGX chief regulatory officer Tan Boon Gin said this when clarifying on the bourse's approach to deciding when to move against false trading.
In a column published online yesterday, Mr Tan said the SGX is "less likely to take action against matters that are one-off, isolated or technical breaches that do not significantly distort price or volume".
Its approach is to act based on the magnitude of market risks. "The greater the threat to market integrity, the more likely we are to take action," Mr Tan said.
A false market is characterised by distorted stock prices or trading volumes due to manipulation.
The column followed SGX's announcement last week that five trading representatives were fined and suspended last year after they created a false market in the shares of five companies. Three of the trading representatives - Mr Lim Kok Tong, Mr Yeo Lay Hoon and Mr Lim Pei Woon - executed extensive cross trades among their clients for eight months to artificially maintain the share price of Zhongmin Baihui Retail Group between January and August 2015.
"The trades accounted for 90 per cent of the market volume traded at prices between $1.825 and $1.840," Mr Tan said.
The greater the threat to market integrity, the more likely we are to take action.SGX chief regulatory officer Tan Boon Gin
He urged market participants to beware of repercussions when their actions have larger impact on the market, such as trading order or volume that exceeds 30 per cent of a stock's total.
"A market participant should also take note that we will not hesitate to warn the public of a prolonged false market through the issuance of a trade with caution alert, if necessary."
Mr Tan said the SGX's consideration is based on several key factors, such as the duration of misconduct, the number of breaches, whether the misconduct was systemic, the amount of benefit gained or detriment caused and the impact of the misconduct on the market, including whether confidence in the market may have been hit.
"Market participants should not jump to the conclusion that we will take action simply because there has been layering, or even pre-arranged trading," he said.
Layering involves a trader repeatedly making and cancelling trade orders in the hope of getting a better deal.