Singapore is prepared against meme stock trading, says MAS

Rick Steves

According to the regulator, there have been no signs that social media discussions led to any significant increase in the trading of securities listed in Singapore.

Singapore’s financial watchdog, Monetary Authority of Singapore, has spoken to Parliament in regard to the securities trading fueled by online discussions and social media chat groups.

According to the regulator, there have been no signs that social media discussions led to any significant increase in the trading of securities listed in Singapore.

In spite of that, MAS states there are important lessons to learn from the wild trading dynamics and disruptions that took place in the United States.

“While investigations by the US authorities are ongoing, the triggers for the event were not unfamiliar to the industry. Certain investors had accumulated large short positions, exerting downward price pressure in the affected stocks. This was followed by online discussions amongst retail investors to buy the stocks, which increased their prices. These prices have since fallen from their peaks, raising a new issue of whether the price increases were sustainable”, the statement said.

Singapore’s regulator has various safeguards in place to address such risks, particularly the “pump and dump” and the “short and distort” scenarios, both using online forums and social media chat groups to have their way.

The safeguards aim to provide market transparency, curb any sharp price movements, and enforce against market misconduct. The supervisor, through SGX RegCo, can issue public queries in the occurrence of unusual price movements, as well as a “Trade with Caution” alert on securities.

SGX also deploys circuit breakers, which temporarily suspends trading, in order to curb the effect of a sharp movement in the price of a security. In addition, SGX can restrict specific market participants from trading or requiring investors to place more collateral, and even suspend the trading of one given stock.

Singapore’s law also acts firmly against persons who disseminate misleading information or use manipulative and deceptive practices. In 2020, the Monetary Authority of Singapore (MAS) issued a prohibition order (PO) against a former bank employee for fraud and dishonest conduct.

Chew Swee Sun Johnny, former representative of Bank of Singapore Limited, engaged in a scheme to defraud IG Asia by placing false orders for securities in three SGX-listed counters. His goal was to influence CFD prices offered by IG Asia in his favor. The trades in the underlying securities were ultimately never executed and would be withdrawn shortly after the CFD orders were executed.

Mr Chew eventually made restitution to IG Asia, but was still convicted of employing a scheme to defraud and for unauthorized trading under the SFA. The Court sentenced him to 8 week’s imprisonment. MAS issued a 3-year ban from the trading industry.

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