Singapore Regulator Plans to Make Share Short-Selling Transparent

Singapore has proposed new rules that would require investors to report short sales of shares – a further sign authorities are stepping up scrutiny of investors who take a negative view on listed companies and aggressively sell their shares.

The consultation paper published by the Monetary Authority of Singapore ("MAS") on Wednesday, 14 December, follows a similar proposal by Hong Kong's Securities and Futures Commission ("SFC") last year, and comes amid a growing number of public short-selling campaigns against listed companies in the region.

Short selling involves the sale of a security that the seller does not own, or has borrowed, believing that the security's price will decline so that it can be profitably bought back at a lower price.

MAS said short selling "can enhance the price discovery process and maintain market discipline", but its proposals aimed to enhance transparency by requiring market participants to mark short-sell orders to the exchange and report short positions above a certain threshold to the MAS.

Aggregate information on short sell orders and short positions would be published, the MAS said.

Singapore is one of several markets, which include Hong Kong and Japan, that have been subject to campaigns by short-sell research firms over the past two years.

There were three such raids this week alone in Hong Kong and Japan.

Last year, Singapore-listed Noble Group became one of the highest-profile subjects of short selling, with Muddy Waters saying it was shorting the stock due to concerns over the commodities trading firm's financials.

Regulators and companies in Asia are increasingly pushing back against such campaigns, with Hong Kong's SFC successfully banning US short-seller Andrew Left from the Hong Kong market in October following his 2012 report on China's Evergrande.

MAS said the regulations would bring Singapore in line with international short-selling guidelines.

The proposed MAS rules would apply to the immediate legal owners of the stocks, while designated market makers would be exempt. The MAS said it intends to give the industry four months to implement the new rules, once they are finally published.

The consultation closes on 27 January.

Reportable positions include those equivalent to or more than 0.05 percent of eligible shares or S$1,000,000 in aggregate value.