Wednesday, 26 March 2014

SGX: twice "attacked" in the press

Today the SGX was twice "attacked" in the Business Times (Singapore):

SGX site is now counter-intuitive

Some snippets:

... The most baffling, unannounced change concerns real estate investment trusts (Reits) and business trusts. Previously, someone who wanted to search for the announcements made by, say, Cache Logistics Trust, could go directly to the "company disclosure" section and search immediately for the name of the company. Now, one can only access the information after identifying and searching for the name of the company managing the Reit or trust, which can sometimes be very different.

...... Moreover, the new layout is a design disaster.

The main focus of the page no longer seems to be on the company announcements themselves, but on two large columns devoted to company names and security names. The titles of the actual announcements themselves - which can be significant corporate events like contract wins, debt listings, mergers and acquisitions and financial results - are squished into one tiny column on the right.

..... Mr Webb, by the way, has a great webpage with a formidable database on directors and companies, which he built through the years with just one other person. SGX, with all its resources, can do better here.

In my opinion, Bursa Malaysia has an excellent website regarding the company announcements and thus appears to be doing much better than the SGX. A few things could be improved though:
  • When a company changes its name (which does quite often happen), one can only find the old information under the new name. For instance, information regarding "Woo Hing Brothers" is to be found under "Kamdar Group", the 12th page and further.
  • Enforcement actions are stored (or rather, hidden) under "Media". There should be an easier way to find all enforcement related news sorted by date or company, combined with those of the Securities Commission.
  • I love long term charts, it would be good if Bursa can give the price charts over more than 5 years.
  • A database of companies and directors, similar as done by David Webb.
But other than this, an excellent announcements website, that can compete with the best.

The second article regarding SGX is from Mak Yuen Teen:

SGX should be more proactive against potential insider trading

Last week was not a good week for the regulatory side of SGX. On the one hand, it was criticised for not querying Olam, while on the other, it was told that it was too easy on the trigger for "Trade with Caution" (TWC) alerts.

There is a role for TWC alerts, particularly for issuers which have unusual trading activities and which cannot explain them when queried by SGX. From our research, about three-quarters of responses to price queries say that they could not explain the price run-up or decline. SGX should focus on these companies when issuing TWC alerts, rather than companies which have attempted to explain the unusual trading activities. This is not to say that SGX should never issue TWC alerts in other cases but it should be more circumspect in doing so. Otherwise, over time, such alerts may cease to serve any useful purpose and we may then see a new alert in the form of Trade with Extreme Caution to differentiate it from Trade with Caution.

I appreciate that SGX is enhancing its regulatory role and the increase in its surveillance activities should be applauded. However, SGX and other regulators should recognise that surveillance is only part of the system of monitoring and enforcement.

In the case of the 75 per cent of issuers which say that they have no explanation for unusual trading activities, do the regulators track whether these issuers announce significant corporate developments soon after they issue their "no explanation" responses? Do they investigate whether the prior unusual trading activities were the result of leakage of information about these developments?

Olam, which was not queried, is far from being the only stock that has experienced significant price movements before a major corporate announcement. The issue should not primarily be about whether an issuer is queried, but whether there are unusual price or volume movements before major corporate announcements which may indicate possible insider trading. Some markets, such as the US, focus on investigations and enforcement rather than queries and public disclosure around these queries.

SGX and other regulators should examine the balance between surveillance and enforcement and ensure that sufficient resources are put into investigations and enforcement. This may require the government to review the resources allocated to agencies and units which are responsible for investigating and prosecuting capital market-related offences. Surveillance and enforcement need to go hand in hand and it is well accepted that the key to a robust capital market is effective enforcement. If enforcement is improved, we may also see a decline in the need to issue queries and TWC alerts over time as unusual trading activities may become less common.

This article is unfortunately very relevant for Bursa Malaysia, both regarding possible insider trading (which I think is a real problem in the Malaysian market), and regarding the last paragraph (resources allocated to enforcement).

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