On 8 Jan, the Singapore Exchange (SGX) announced that they will report daily short sales volumes for every counter beginning in March as it aggressively pursues leadership status in the field of risk management and transparency.

In short-selling, traders borrow shares and sell them in the hope of buying them back cheaper in the future, thus profiting from a drop in the share price. With the rule, traders will have to tag as a short sale any trade in which the seller does not own the shares. SGX said it will publish daily reports on the total value and volume of short sales for each counter.

The change comes two- and-a-half years after SGX first issued a public consultation on the topic. In its consultation paper from July 2010, SGX noted that the increased transparency could serve two purposes.

  • “First, the information may assist with pricing efficiency by serving as input for investors in their investment decisions,”
  • “Second, the information disclosed may serve an evidentiary purpose for regulators of any abusive short-selling activities.”

It looks like that the recent Olam International’s stock being shorted by hedge fund Muddy Waters may be the catalyst to speed up the change. Well, it is always easy to blame any stock price crash to short sellers. but investors should remember that any short seller will eventually become a buyer and any buyer will become a seller. Who are the real sellers who cause the stock price to plunge? Who makes money and who loses money? It may not be so simple.

You can read the press release here, SGX observes new global regulatory, risk management and capital standards.

About the Author

Ivan Guan is the author of the popular book "FIRE Your Retirement". He is an independent financial adviser with more than a decade of knowledge and experience in providing financial advisory services to both individuals and businesses. He specializes in investment planning and portfolio management for early retirement. His blog provides practical financial tips, strategies and resources to help people achieve financial freedom. Follow his Telegram Channel to join the FIRE community.
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