CMFAS M4B Exam Free Trial

A short sell order is considered to have been made when the seller does not have interest in the product at the time of order. Short sell orders for specified capital markets products are required to be disclosed to an approved exchange.

Identical to the arrangement of institutional participants with multiple trading desks, multiple fund managers may manage an investor’s portfolio under separate discretionary mandates. In accordance to this, the MAS bestows flexibility on investors with regards to disclosing short sell orders and short position at a fund manager level.

Any share of a corporation, unit in a business trust, and unit in a real estate investment trust are defined as the approved exchange as securities subject to short sell order disclosures and short position reporting requirements. Derivatives are merely required to be reported as a short sell order once they are exercised and once obligations are created.

A portfolio manager is given the primary responsibility of making the firm’s investment decisions. At a legal entity level, a single portfolio manager oversees three trading desks.

A trustee is expected to report and make disclosures regarding short sell orders and short positions contained in the trust for which it acts as a trustee. The MAS gives trustees the privilege of flexibility with regards to the level at which orders and positions may be consolidated.

The MAS provides an investor with the liberty to disclose short orders and positions at a fund manager level when dealing with discretionary investments portfolios. Delegating decisions with regards to investment portfolios to fund managers may accordingly enable an investor to establish arrangements for the disclosure of short orders or positions on their behalf. Diligence and care must be ascertained so as to prevent double counting.

Each trading desk operates under a different portfolio manager and under a different investment mandate. Trading among these trading desks occurs independently from each other, would thus necessitate additional resources in order to consolidate orders and positions. To eliminate the burden imposed by this requirement, the firm is given the option to disclose short sell orders or positions at trading desk level.

Under trust level, a trustee is managed independently of each other. Trustees are given the option to choose to disclose short sell orders and short positions at an individual level, or to appoint a third party, such as a manager, to do so. It must be noted, however, that due care is exercised in order to prevent the double counting of disclosures.

In the case that trading in specified capital markets products is suspended, the requirement of reporting short positions in the products on position day still applies. Before the day of suspension, the closing price provided on the last trading day shall serve as an indicator as to whether or not the short position equals or exceeds the short position threshold on position day.

The SFA guidance on the reporting of short positions states that all short positions in specified capital markets if the short position is equivalent to or exceeds the short position threshold on position day. In determining this fact, a threshold is indicated as the lower value between 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 SGD2,000,000 in aggregate value. To effciently deal with uncertainties that may arise, a person is freely given the option to report the short positions despite not meeting the required threshold.

Under Part XI of the Securities and Futures Act, each approved exchange shall establish, keep, and administer a fidelity fund. A fidelity fund covers all asset classes of mutual funds that will provide investors diverse choices of funds to help achieve one’s investment goals. The assets of a fidelity fund shall be the property of the exchange, separated from all other properties and be held in a trust.

A short position transpires when a person is interested in a value of a capital market product that is less than the quantity a person has to bring about at some point in the future. It is an investor approach wherein they sell what they borrowed in a short amount of time. The amount should be netted against the long interest of the product and shall not constitute the whole sum of the selling transaction. Its varying significance is required to be reported to MAS.

The persons legally responsible for reporting short positions are those who deliver specified market products that may indicate a short position as a result of the transaction. They must report the short position to MAS by preparing a Short Position Reporting Form that will be submitted within two (2) days after the position day. The Short Position Reporting Form shall indicate the position day, the stock code of the specified capital markets product, and the number of shares in the short position by the reporting person.

The purpose of laws is to provide control and authority over its constituents. The prescribed laws specified in the Securities and Futures Act are the act itself, the Banking Act, the Finance Companies Act, the Financial Advisers Act, the Insurance Act, the Monetary Authority of Singapore Act, Payment Services Act 2019, and/or any other written law as prescribed by the Authority. These prescribed laws govern the Securities and Futures Act and its parts, divisions, and subdivisions.

All transactions in financial markets should be confirmed in writing or electronic means by the parties and should be addressed to the back office or settlements department of the counterparty. The content of the confirmation shall be modified in accordance to the products dealt with for correct content and format for any particular product, and shall include the date of transaction, by which means affected, name and location of counterparty, rate, amount and currency, type and size of deal, relevant dates, standard terms applicable set out in the relevant master agreement, and all other relevant information.

Corporations arrange proprietary trading terminals in order to provide a platform on which institutional investors may enter orders and transact on the overseas market from the premises of Singapore. In that sense, these facilities also bestow upon institutional investors direct access to the overseas market.

Electronic trading facilities manage the trading of corporate and government bonds. It works by automatically executing and clearing a firm-price order once a match is found in the form of an existing firm-price order. Since the facility paves way for the automatic matching of orders with firm prices, it becomes reasonable to presume that the orders published on the facility will lead to the conclusion of a transaction.

Obtaining sufficient financial, human and system resources are among the obligations that are required to be fulfilled by regulated market operators to ensure the operation of fair, orderly and transparent markets, to adequately respond to contingencies and disasters, and to establish adequate security arrangements. An RMO is expected to maintain a degree of resources adequate to support trading activities and meet the business and operational needs.

In making amendments to business or listing rules, approved exchanges or RMOs must determine the impact of the changes on the participants. In doing so, they must allot a reasonable time between publish date and effectivity date, give the participants with the opportunity to comment on the proposals made by means of a consultation, and provide the MAS with a summary of the comments received post-consultation

Approved exchanges are expected to maintain appropriate and adequate surveillance and enforcement programmes in place to be able to monitor compliance of members with business rules and ensure that members are disciplined through fair and objective means. These support the smooth and stable operation of the market.