Traders cry foul over losses from SocGen actions on SIA shorts
Issuer of daily leveraged certs used what some say is an aggressive formula to calculate the price of SIA shares ex-rights TRADERS in the 5x Short Singapore Airlines (SIA) daily leverage certificates (DLCs) saw their positions go to zero on Wednesday when SIA shares rose more than 20 per cent upon trading ex-rights. The short squeeze was exacerbated after Societe Generale (SocGen), the issuer of the certificates, used what some traders said is an aggressive formula to calculate the price of SIA shares ex-rights. SocGen also gave them very little time to hedge their bets in reaction, the traders said. The full damage is not known but in the week ended May 1, over 1.8 million short DLCs worth S$1.4 million were in the hands of investors. DLCs are instruments that move either up or down based on the price of an underlying asset. A 5x Short DLC will move inversely to the underlying asset price by a factor of five, so a 20 per cent increase in SIA's share price would p...