Singapore Exchange (SGX) plans to introduce changes to its clearing and settlement system on 6 November aimed at reducing non-delivery of securities and imposition of the related penalties.
The exchange will bring forward the securities delivery deadline to 12.00 on the third day after the trade took place (T+3) to allow the buying-in process for non-delivered securities to be conducted on the afternoon of
T+3 instead of the morning of T+4. This means that the buy-in process can be completed before the trade is deemed to have failed and penalties are imposed.
The new buy-in time will be between 15.00 and 17.00 on T+3 and CDP, Singapore’s central securities depository, will publish the list of securities to be bought in on the SGX website at 14.30 on T+3.
SGX will allow a transition period between 6 and 26 November to allow market participants to adapt their internal processes to the changes. The new T+3 buy-in time will take effect on 30 November.
A trade is deemed to have failed if buy-in for the shortfall of securities is unsuccessful by the end of T+3. SGX will impose a penalty of S$1,000 or 5% of the value of the failed contract that was not bought in (whichever is higher) at the end of T+3. The existing penalty waiver arrangements will continue.
Buy-in will continue on T+4 and T+5 from 15.00 to 17.00 for outstanding undelivered securities at the end of T+3. For failed delivery of securities that cannot be procured after T+5, a penalty of S$5000 will apply each day.
Extended failed delivery of securities after T+7 or failed delivery of securities in the buy-in market may be referred to the exchange’s disciplinary committee to decide on the appropriate penalty.