SINGAPORE: There is no evidence that discussions in online forums or social media chat groups have led to a “significant increase” in trading in Singapore-listed securities, Mr Ong Ye Kung told Parliament on Tuesday February 16.
Mr. Ong, Singapore’s Transport Minister and board member of the Monetary Authority of Singapore (MAS), also said that there are various safeguards in place to protect against such risks.
MAS and the Singapore Exchange Regulation (SGX RegCo) are on “heightened alert to such activity”, he said, noting that recent events in the United States have highlighted the risk of excessive trading leading to short price change.
“There are important lessons to be learned from this experience and we should be alert to a similar risk that may arise in our markets while investigations by US authorities are ongoing,” he warned.
READ: Singapore investors warned of securities trading risks prompted by online forums and social media
Mr Ong’s comments were in response to a question from MP Desmond Choo (PAP-Tampines), who had asked about the influence of online chats and social media chat groups on securities trading and securities trading. safeguards against such “destabilizing” activities.
Mr Choo’s question came after authorities in Singapore issued an investor warning earlier this month amid interest in recent market activity in stocks such as GameStop, AMC Entertainment Holdings and Blackberries.
Federal prosecutors and regulators are investigating whether “market manipulation or other types of misconduct” led to a meteoric rise in shares of companies such as GameStop and AMC, The Wall Street Journal reported last week.
Shares of GameStop – which had been heavily touted on Reddit’s WallStreetBets – were up 2,460% on the year to a high of US$482.25 in January as some institutions that had been betting on lower action were forced to unwind their positions. in the middle of a flood of purchases. Since then, GameStop has fallen and closed at US$52.40 on Friday.
READ: Federal agencies launch probe into possible manipulation after GameStop trading frenzy: WSJ
GUARANTEES IN PLACE
Mr Ong said there are “various” safeguards in place in Singapore against scenarios such as “pumping and dumping” and “short and crooked”.
In the “pump and dump” scenario, Ong explained, some parties incentivize the trade to drive up prices, including through online forums and social media chat groups.
“Once prices reach specific levels, they can then sell the securities they had previously accumulated. When prices eventually fall, other investors could suffer quite heavy losses,” he said.
In the other scenario, some investors take short positions in certain securities and use false or misleading information to encourage more short selling.
“Our guarantees deal with such scenarios in three ways. First, ensure market transparency. Two, curb any sudden price movement and three tackle market misconduct,” he said.
When there are unusual price movements in a company’s securities, SGX RegCo may issue a request and the company must publicly clarify whether it is undertaking any activity that would warrant such a price spike or price change. If price rumors influence stock prices, the company is required to provide a prompt and comprehensive response to any allegation, he said.
As an early warning to investors, SGX RegCo may also issue a trade cautiously alert on securities where the potential for disorderly trading exists. He added that aggregate short positions and trading volumes are published for each security.
“These measures provide transparency to investors, allowing the market to self-correct where there is excessive trading that is not supported by company fundamentals,” he said.
To limit the effect of a sudden movement in the price of a security, a circuit breaker can be triggered which temporarily suspends trading. SGX may also impose additional conditions, such as prohibiting trading to specific market participants or requiring investors to post additional collateral.
“In extreme cases, the affected securities may be suspended from trading entirely until further notice,” he said.
Ong said firm enforcement action will be taken against those who break the law. In particular, it is illegal to disseminate misleading information or to use manipulative and deceptive practices, he said.
READ: GameStop tumbles nearly 20% as retail surge wanes
PROBABILITY OF A SHORT PRESS
Mr Choo also asked about the likelihood of a “short squeeze” in Singapore causing “massive market dislocations”.
He also asked about MAS’ position on the creation of platforms such as online broker Robinhood in Singapore, given that “Robinhood was one of the key platforms” that a social media group had used to attempt to create “massive market dislocations”.
In response, Mr Ong said short positions in Singapore are “much less” compared to the US, citing the local culture of investors, the level of disclosure required of listed companies and the lack of unique stock options. .
“When it comes to platforms like Robinhood, you know how online platforms are. It’s hard to control, so I think at the end of the day it’s always about having a good regulatory regime that works and transparency and a well-functioning market to prevent such things from happening in the first place,” he said.