TWO former senior employees of UOB Kay Hian Private Limited (UOBKH) were charged on Wednesday for allegedly lying to the Monetary Authority of Singapore (MAS) in relation to reports on a then Catalist aspirant. Lan Kang Ming, 38, and Wee Toon Lee, 34, each face three charges of providing MAS with false information in October 2018 in relation to due diligence reports on an unidentified company applying to list on the Catalist board of the Singapore Exchange. MAS said in a media statement on Wednesday that it was performing an onsite inspection of UOBKH between June and August 2018, to assess the latter's controls, policies and procedures in relation to its role as an issue manager for Initial Public Offering (IPOs). During the examination, Lan and Wee were said to have provided different versions of a due diligence report relating to background checks on a company applying to be listed on the Catalist board of the Singapore Exchange. UOBKH had acted as the issue manager
Comments
R Sivanithy
29 November 2013
In a few months’ time, the local stock market should see the introduction of dynamic circuit breakers in daily trading, which are aimed at giving traders a five-minute cooling-off period to think about what they are doing when prices move by more than 10 per cent in either direction.
Retail traders - so often on the receiving end of sudden, unwanted volatility - should welcome this as it means they have a greater chance of reducing their losses and preserving their capital when prices plunge abruptly.
Looking after retail interests is all the more important given the increasing presence of computerised trading and the Singapore Exchange’s (SGX) stated plan to eventually bring in high-frequency traders to enhance liquidity here.
However, circuit breakers are only a start. More should be done to preserve the interests of small investors and to give them at least a fighting chance in a market which is already dominated by house traders, proprietary desks and algorithmic players using super-fast computers.
One suggestion made by a remisier with 20 years’ experience is worth considering. In an email to BT this week, he called for SGX to uniformly implement a stop-loss feature in its GL trading system for retail players and to constantly emphasise the need to use this feature in its educational seminars.
A stop-loss level is the price beyond which losses will be too painful. So if someone buys a stock at $1 and will only tolerate a 10 per cent loss, then the stop-loss will be pegged at 90 cents.
In effect, having such a facility amounts to allowing each retail player to tailor their own circuit breaker based on their individual risk tolerance. In this way, every small trader has a better chance of preserving his or her capital and managing the finances.
According to dealers, SGX’s GL system does have a stop-loss option under the “Tactics” column on the trading screen but this is not activated for all houses. SGX should look at correcting this and at actively encouraging retail investors to use it in their day-to-day trading.
A second suggestion is one that’s been made in this column before, and that is to revive the cash market.
For those who remember it, this was a segment that existed for years throughout the 1980s and early 1990s, running in tandem with the “ready” and “odd-lot” markets. For reasons unknown, it was scrapped in 1994 and repeated calls over the years to resurrect it have not been successful.
Yet the cash market offered investors many benefits. It was a segment where scrip could be obtained at very short notice if cash was paid upfront. So where the ready market initially operated on (T+5) delivery before it was shortened to the present (T+3) in 2000, delivery in the cash market was (T+1), with T being the transaction day.
Having a cash market readily on hand offers retail traders many advantages. Perhaps the most relevant is that those with outstanding short-sold positions at the end of each day would not have to worry about the exchange forcibly filling those positions via its “buying-in” - a daily exercise which, despite having been fine- tuned over the years, is still criticised for being overly heavy-handed on inadvertent errors.
With a cash market, anyone who had oversold a position on date T could immediately fill it the next day and avoid being caught short on (T+3) - and thereby escape a potentially large loss when the exchange’s buying-in was executed.
In addition, having a segment on hand where settlement and payment are based on (T+1) offers investors greater choice and flexibility in daily money management - surely an advantageous feature of any developed capital market.
It is important to note that a cash or immediate-delivery market would only complement - not replace - the exchange’s buying-in process, because the latter would still be needed for positions that might not be covered via cash market purchases.
Again, the main beneficiaries of such a segment would likely be retail players. In a market becoming more and more lopsided in favour of the big boys, this is surely a worthwhile pursuit.