The Monetary Authority of Singapore (MAS) will require short order disclosure and short position reporting to commence from 1 October 2018. The main impact is the requirement for short position reporting as the Singapore Exchange (SGX) already requires persons to mark their orders as short sales. This update will therefore focus on the requirement to report short positions.

What products are affected?

The requirement to report short positions will apply to shares, units in a business trust and units in a real estate investment trust (REIT) listed on the SGX. It applies to both primary and secondary listings. Derivatives are not included until they are exercised.

Who must report?

The person legally responsible for the delivery of specified capital market products that may result in those short positions (Investor) will be the one responsible for reporting the short position. Accordingly, where an Investor has other persons making trades on his behalf, he remains responsible for reporting the short position although he may delegate the task to these other persons. Unlike the requirement to disclose short orders, there is no exemption for market makers.

When does a short position arise?

An Investor has a short position in securities when the amount by which the quantity, volume or value of securities in which he has an interest is less than the quantity, volume or value of the securities which he is obliged to deliver.

A person need not be the legal owner of the securities to have an interest in it for the purposes of the short position reporting regime. He will also have an interest in the securities if he has agreed to purchase those securities even if they have not been delivered yet. He must however be entitled to take delivery of the securities before the day he himself is obliged to make delivery of them. If his entitlement to take delivery arises only after the day he is obliged to make delivery of them, he has a short position in those securities.

When does a person have a reportable short position?

A short position must be reported only if it exceeds the specified threshold on the position day. There is, however, an important exception to this rule which will be discussed below.

A position day is the last business day of each calendar week. This is normally a Friday unless Friday is a public holiday.

The specified threshold is the lower of:

• 0.2% of total issued shares in the relevant class of shares or units in the relevant class of units of a business trust or real estate investment trust; or
• SGD2 million in aggregate value.

In determining aggregate value, the closing price of the securities on position day is used.

When must the short position be reported?

The reporting of the short position must be done within two working days after the position day. Ordinarily, therefore, this will be the following Tuesday.

How do Investors that have other persons trading on their behalf report their short positions?

An Investor may have various other persons making trades on his behalf. This can arise in three main ways:

• A financial institution carries on trading through several trading desks.
• An individual investor has several brokers with whom he has discretionary accounts.
• A trustee has several trusts in respect of which he acts as trustee, each of which is managed by a different manager.

In each of these instances, the financial institution/individual investor/trustee is the party with the obligation to deliver the securities. It is therefore the person with the obligation to report any short positions it has entered into through its trading desks/brokers/ managers. In each case, the Investor may choose to aggregate and consolidate the trades entered into on its behalf and report the aggregated position. In this situation, it need only report if its short positions exceed the specified threshold.

Alternatively, the Investor may choose to have its trading desks/brokers/managers report their short positions at their own individual level. They will then report on their own individual positions without taking into account the trading positions of the other trading desks/brokers/managers that are trading on the Investor’s behalf. In this situation, the trading desks/brokers/managers must report their individual short positions regardless of whether they are below the specified threshold.

Next steps

Reporting is to be done using the MAS’s online portal, the Short Position Reporting System (SPRS). Investors will need to apply for an ID for the SPRS.

Once short position reporting starts on 1 October 2018, the MAS will aggregate and publish the aggregated anonymised information weekly.