SGX to cut down on unusual trading activity queries by half

The number of queries issued by the Singapore Exchange (SGX) on unusual trading activity will be going down by half from Wednesday.

Tan Boon Gin, chief executive of SGX RegCo, the bourse's regulatory unit, told The Business Times that the move will eliminate unnecessary queries over what he dubs "noise" in the market.

"Markets view (queries) as a chilling effect on share prices," he said. "I'd rather issue fewer, higher quality queries, than a higher volume."

A new system, which goes live on Nov 1, will be calibrated such as to allow prices and volumes to increase a bit more before a query is issued.

The robustness of the regulatory regime will not be compromised, Mr Tan said.

"We backtested this to make sure, with the benefit of hindsight, those cases we properly queried will still be queried under the new system. It's only those cases that we didn't need to query that will be (cut) from the system. As far as we're concerned, we're just reducing the amount of noise."

The SGX uses a system that generates alerts for unusual activity. These alerts are then analysed before a decision to issue an official query to the company to clarify if any material information should be disclosed - a regime that few exchanges around the world possess.

Last September, the SGX launched two initiatives to collaborate with member firms to detect and stop market misconduct.

A trade surveillance handbook given to brokers aimed to educate traders on market manipulation offences such as spoofing and layering (putting in orders with the intent of cancelling them), and marking the close (executing orders near the end of trading hours to artificially depress or inflate prices).

A members surveillance dashboard given to member firms also contains reports on the specific alerts triggered by SGX's system on the above three offences.

These two initiatives have cut down on the number of alerts generated on them by half, Mr Tan said.

Asked about insider trading, another form of illegal market activity by trading on non-public material information, Mr Tan said that the SGX is working on an initiative to be announced at a later date.

Cai Haoxiang

31 October 2017