When a seller offers for sale capital markets products without possessing the ownership of such at the time of sale, a seller is deemed engaged in short selling. Short selling may be classified as either “covered” or “uncovered” depending on whether or not borrowing arrangements have been made prior to the short sale.

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.

Under Section 137ZK of the SFA, a person is obliged to report its short positions in any specified capital markets products to MAS, with regards to whether the short position is equivalent to or surpasses the short position threshold on position day.

Short Position Reporting forms are expected to embody the position day on which the short position is identified, the stock code of the specified capital markets product and the number of shares in which the reporting person holds a short position. A reporting person, and if applicable, his reporting agent must both possess a unique SPRS identifier. This SPRS identifier enables them to enter the said short position reporting form.

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.

The presence of risks with regards to short selling may not be ruled out as it is sometimes utilized as an opportunity to commit fraud; such is the case when false rumors are created to encourage others to sell.

A person’s interest in a product signifies his/her long position. A person is considered to have interest in a product when he/she possesses legal or beneficial ownership over the it (except if a person engages in a securities lending arrangement as a borrower) and will receive the product before he/she is expected to deliver it.

Short selling rules are set out to ensure the reporting of covered shorts. A person who borrows securities under a securities lending arrangement and subsequently sells them are expected to report the sale as a short sell order. This person is considered to have a short position between the time the securities are borrowed and the time they are returned to the lender.

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.

The persons that have the legal obligation to deliver specified capital markets products which have the possibility to result in short positions have an associated responsibility to report those short positions. In case of a trust, or unit trust, the duty to report rests with the trustee, and not the manager or the unit holders.

Institutional participants are given the ability to cater to different decision making and operational models through the flexibility extended to them with regards to determining the level at which their orders and positions should be consolidated. They may report short position regardless of whether or not it approximates or exceeds the threshold on position day. This makes it easier administratively as the necessity to monitor the aggregated position at the legal entity level is eliminated.

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.

Institutional participants are required to access the SPRS in order to enter and establish separate reporting identities for the entity and each trading desk. The reporting may be delegated to any of the trading desks by designating a SPRS ID to each one and including the ID to the SPRS delegation list.

The MAS expects a person to report his short position by means of completing a Short Position Report Form within two business days from the position day. This is done by entering the form into the SPRS that may be accessed through MAS website.

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 approved exchange publishes the closing prices of specified capital markets on position day in order to provide a basis upon which the value threshold of SGD2,000,000 is computed. In case the specified capital markets are quoted or traded in a foreign currency, the reporting entity may consult with the exchange rates published by the MAS in order to determine if the threshold is met.

A person must either obtain ownership over the product through purchasing it, convert or exchange other products into the product, subscribe for the product by means of exercising an option or warrant, or recall the product loaned through a security lending arrangement in order to receive a product before he/she is expected to deliver it. This constitutes one of the factors that deems a person as having interest in a product.

The obligation to disclose short sell orders in respect of market-making activities are not imposed on market makers. They are exempt from this requirement in order to prevent their efficient submission of continuous bids and offers from being subject to hindrance.

The Central Depository (Pte) Limited (CDP) minimizes the risk of subjecting the settlement system under the disruptive effects that may result from short selling. Through the buying – in process, where the CDP purchases securities on behalf of sellers for delivery on settlement day, the seller who fails to deliver is made to shoulder costs of purchase and becomes subject to additional penalty.

Short selling is defined as the sale of capital markets products that the seller does not own at the time of sale. It encourages efficient price discovery, increased market liquidity, the effective management of risks and the development of hedging activities.

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.

The MAS imposes an obligation of reporting when the short position at the legal entity level is equivalent or if it exceeds the threshold. On the entity level, a portfolio manager is appointed to manage trading desks through which the investment decisions, and as well as records are consolidated. The disclosure of the aggregated short orders and short positions of the trading desks are then reported if they are equivalent or if they exceed the threshold.

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.

A trustee has responsibility over trusts managed by a single manager. Trustees are given liberty to consolidate short sell orders and short positions of the trusts they manage. Arrangements must be made for the appointment of a third party that will bear the responsibility of consolidation.

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.

The last day of the calendar week on which the approved exchange has opened for trading in a relevant class of specified capital markets product marks the position day. This typically falls on a Friday and also serves as the day on which the short position is calculated.

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.

A person who has an obligation to report short positions has the liberty to delegate the duty to a third party reporting agent, who will be tasked to act on the obligation on his behalf. These reporting agents may be in the form of another individual or a corporation. However, despite the delegation, it must be noted that the legal responsibility for compliance still remains with the persons mentioned in paragraph 4.20.

The SFA guidance on the reporting of short positions states that all short positions in specified capital markets if the short position is equivalent 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.

In order to preserve the informational value of short sell order and short position trend data, the approach must be applied in a consistent manner over time. There may be exceptions with regard to this in case the mode by which investment decisions are conducted materially changes, and changes in reporting must also be adjusted. This must take effect promptly following the changes in investment decision-making.