Buy-in penalties, quarterly reporting targeted in sweeping review of SGX rules

By

Kenneth Limkenlim@sph.com.sg@KennethLimBT

SGX is looking into a raft of potential changes, including scrapping automatic penalties for buy-ins and reviewing its calculation of the minimum trading price. 

SPH

JAN 28, 20166:31 PM

SINGAPORE Exchange (SGX) is looking into a raft of potential changes to the structure of the stock market, including scrapping automatic penalties for buy-ins, reviewing its calculation of the minimum trading price (MTP) and studying the need for quarterly reporting and dual-class shares, chief executive Loh Boon Chye announced on Thursday.

Within the next month, the market operator will no longer charge a penalty by default when investors who short-sell a stock fail to deliver the shares for settlement. This is in recognition of the fact that most cases of buy-ins are due to first-time short-sellers and are of small value, Mr Loh said.

Following feedback from the market, SGX is also reviewing the way that it will calculate the MTP for mainboard-listed companies. The MTP, which will take effect between March and September this year, is currently set at a six-month historical volume-weighted average price of 20 Singapore cents, unadjusted for stock splits and share consolidations. Mainboard-listed companies that trade below the MTP will be put on a watch-list for possible delisting.

SGX has also set up a team to review the need for quarterly reporting and dual-class shares. For dual-class shares, the exchange is currently waiting for advice from the independent Listings Advisory Committee.

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In terms of new issues, a current proposal for a minimum retail allocation of 5 per cent for mainboard initial public offerings is under review, Mr Loh said. SGX is examining whether the retail allocation should be higher.

"Some of you may question this given current market conditions," Mr Loh said. "But what this initiative aims to do is building for the future."

Mr Loh also acknowledged that there have been many regulatory changes, both recently and to come. Recognising that "too many changes in a relatively short time can be detrimental or counterproductive", Mr Loh said SGX and the Monetary Authority of Singapore (MAS) have agreed to allow six to 12 months between the implementation of major initiatives.

In that light, implementation of a 5 per cent collateral requirement for all securities trading - which will mark the end of uncollateralised contra trading - will be pushed to 2018.

Beyond regulations, SGX has also teamed up with the Institute of Banking and Finance (IBF), the national accreditation and certification agency for financial-sector jobs, to provide training courses for remisiers and dealers aimed at uplifting the skills in the profession. IBF has also created a new set of competency standards for those trading representatives.

Trading representatives will also receive some respite from MAS.

MAS deputy managing director Ong Chong Tee said on Thursday the financial-sector regulator plans to exempt trading representatives from certain business conduct requirements that are more pertinent for financial advisers. The change is expected by the middle of 2016.

    
 

China central bank to increase open market operations during Lunar New Year

China's central bank said on Thursday it will increase the frequency of open market operations between Jan 29 and Feb 19 to maintain liquidity in the market during the Lunar New Year. 

PHOTO: BLOOMBERG

JAN 28, 20165:23 PM

[BEIJING] China's central bank said on Thursday it will increase the frequency of open market operations between Jan 29 and Feb 19 to maintain liquidity in the market during the Lunar New Year.

The People's Bank of China (PBOC) said it would allow more banks to participate in the short-term liquidity operation (SLO) effective Jan 29. Bonds issued by government supported agencies as well as commercial banks can be used as collateral for borrowing in SLOs and open market operations.

The PBOC launched SLOs in 2013 to supplement its other monetary policy tools. The facility is mainly used to provide one- to three-day direct lines of credit to commercial banks, though loans with other maturities are occasionally used.

REUTERS

    
 

EU takes aim at multinationals' multi-billion tax avoidance

JAN 28, 20166:26 PM

[BRUSSELS] The European Commission proposed on Thursday allowing EU countries to tax corporate profits at home in some circumstances even if the money has been transferred elsewhere to avoid such payments.

Weighing in on a row about business responsibility and fairness, the Commission proposed a set of measures to tackle some of the most common tax avoidance schemes used by multinational companies to reduce their tax bills.

Business warned that the measures could hurt competitiveness and deter investment.

Big corporations legally avoid taxes of up to 70 billion euros (US$76.10 billion) a year in Europe, a study of the European Parliament estimated, with global losses from such schemes ranging between US$100 billion and US$240 billion.

"Billions of euros are lost every year to tax avoidance. This is unacceptable and we are acting to tackle it," the EU tax commissioner Pierre Moscovici said in a statement calling "for fair and effective taxation for all Europeans." Responding to such criticism in Britain, Google agreed last week to pay 130 million pounds (US$185 million) in back taxes, but it was seen by many as too little compared with the profits made by the company in Britain.

Among the Commission's proposals - which would have to be approved by all European Union member states - is one to deter multinationals from shifting their profits from parent companies to subsidiaries in low or no tax countries.

EU countries would be allowed to tax profits generated in their territories after they are transferred somewhere else, provided that the effective tax rate in the country where the profits are transferred is less than 40 percent of that of the original country.

Loopholes that allow companies to use dividends or capital gains to skip taxation would be closed and national mismatches in the tax treatment of some complex instruments would also be eliminated, the EU executive said.

Ceilings would also be imposed on the amount of interest a company can deduct from its taxable income. Currently companies can shift debt to subsidiaries based in countries that allow higher deductions.

The proposed measures aim at turning into binding rules some of the voluntary guidelines against tax avoidance, known as anti-BEPS (base erosion and profit shifting), agreed by the G20 group of the world's largest economies and by members of the Organisation for Economic Co-operation and Development. "These important proposals will close a number of the scandalous loopholes that have enabled companies to avoid and evade tax across Europe," Michael Theurer, an EU liberal lawmaker in charge of tax avoidance, said in a statement.

Corporations will have to reveal their taxes, profits, revenues and other financial data to the administrations of all countries where they operate, which then will exchange data among themselves, the proposed rules say.

By increasing transparency, the measure is expected to deter aggressive tax planning, but it falls short of a fully public disclosure that may have exposed companies to further scrutiny. The Commission did however not rule out that such a measure may be proposed in the future.

Markus Beyrer, head of EU companies' lobby group BusinessEurope, said the proposed measures could hurt business. "The EU must not act as lone front-runner in implementing the BEPS agreement, and must not undermine the competitiveness of EU industry or damage the EU's attractiveness as an investment location," he said in a statement.

REUTERS

    
 

MAS to take over some member supervision duties from exchanges, leave listings to self-regulation

By

Kenneth Limkenlim@sph.com.sg@KennethLimBT

JAN 28, 20166:34 PM

THE Monetary Authority of Singapore (MAS) will take over a portion of the supervision of brokers from exchanges and provide an additional layer of market surveillance as it adapts to having more than one exchange in Singapore, MAS deputy managing director Ong Chong Tee said on Thursday.

The new framework takes effect this year.

The change that will affect the exchanges the most is in terms of how exchange members are supervised.

Currently, Singapore Exchange's (SGX) supervision of its members includes checking on statutory requirements such as capital and reserve amounts, business conduct, anti-money laundering and counter-terrorist financing, and operational resilience.

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Last 30 days:

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30 days avg

HOT COMPANIES

SSE +368% messages

• Diageo +241%
• BG Group +238%
• RBS +198%
• HSBC +99%
• Berkeley Grp HLD +80%
• Anglo American +68%
• Lloyds Banking +47%
• Unilever +41%
• RSA Insurance +36%

• Diageo +241%
• BG Group +238%
• RBS +198%
• HSBC +99%
• Berkeley Grp HLD +80%
• Anglo American +68%
• Lloyds Banking +47%
• Unilever +41%
• RSA Insurance +36%

But SGX is no longer the sole exchange in the Singapore derivatives market. Intercontinental Exchange is now operating in Singapore and Eurex is expected to open its doors around 2017.

Requiring each exchange to perform the same level of member supervision will impose upon exchange members the onerous task of undergoing three separate inspections a year with many overlaps, Mr Ong said.

Delegating one of the exchanges as a lead regulator is also problematic from a competitive standpoint - lead regulator that is also an exchange may have unfair access to information that its rivals do not.

MAS will therefore take on the role of the lead regulator with a focus on statutory requirements, while the exchanges focus their supervisory work on matters such as risk management and trading rules, Mr Ong said.

As the top-level regulator, MAS will also be able to supervise members with full knowledge of activities and exposures at each of the separate exchanges and even over-the-counter transactions.

In terms of market surveillance, MAS is building up its capabilities to add a layer of oversight on top of what the exchanges are already doing.

As with member supervision, MAS is hoping to improve surveillance by virtue of its position at the top of the information web with knowledge of positions both on and off exchanges.

MAS is also investing in technology to add data analytics to its surveillance capabilities, Mr Ong said.

But exchanges will continue to self-regulate when it comes to listing rules.

"Much work has been done to enhance the exchange's role around listings," Mr Ong said. "We believe that SGX - as the only securities exchange in Singapore - remains an appropriate listing authority."

    
 

Apple to voluntarily recall some AC wall plug adaptors

JAN 29, 201612:01 AM

[SAN FRANCISCO] Apple Inc said on Thursday it was voluntarily recalling AC wall plug adapters designed for use in Argentina, Australia, Brazil, Continental Europe, New Zealand and South Korea.

The affected two-prong adapters could, in very rare cases, break and create the risk of an electrical shock if touched, the company said in a blog post.

The Cupertino, California-based company said it was aware of 12 such incidents worldwide.

The affected adapters were shipped with Mac and certain iOS devices between 2003 and 2015 and were also included in the Apple world travel adapter kit.

Apple said the recall does not affect AC wall plug adapters designed for Canada, China, Hong Kong, Japan, United Kingdom, United States or Apple USB power adapters.

Apple shares were down about 0.2 per cent in morning trading, in line with the broader market.

REUTERS