The Singapore Exchange (SGX) has launched two initiatives that will see member firms collaborating with SGX to act as gatekeepers with respect to market conduct issues. The first initiative is the launch of a Trade Surveillance Handbook (Handbook) to provide a set of guidelines which member firms can incorporate into their surveillance programmes. Secondly, SGX will share more data linked to possible market manipulation with member firms to assist them to enhance their monitoring of and controls around market conduct. Both initiatives signal a move towards greater industry collaboration around market conduct issues in Singapore.

1. Trade Surveillance Handbook

According to the SGX press release dated 28 September 2016, the Handbook will be issued in a series with the first release addressing the following practices:

A.      Spoofing: The entry of a large number of false orders that the trader does not intend to fulfill, to give a false impression to other market participants that there is strong buying and selling pressure. For example, the trader may enter a series of large sell side trades to give the impression that the market will trend lower from the selling pressure.

B.      Layering: Similar to spoofing, the trader may enter large orders to buy or sell securities without the intention to fulfill the orders. This gives a false impression of demand for a security, prompting a move downwards in the stock price when there appears to be many sellers.

C.     Marking the close: In this case, the trader may seek to enter a very high or low bid near the end of the market close or conduct a wash trade (a trade with no change in beneficial ownership) to give a false impression of a higher or lower market price of the security. This can be done for various reasons, including to support the price of the security to avoid margin calls.

With the introduction of the Handbook, market participants will be better able to spot and analyse key patterns of potential market manipulation, and adjust their internal controls and surveillance programmes. 

The regulators have also taken recent action against traders who have engaged in the above practices. In July 2016, the Monetary Authority of Singapore (MAS) and the Commercial Affairs Department (CAD) jointly charged a former remisier (ie, an agent of a broking firm who provides trading advice and executes trades for clients) with spoofing in the stocks of several listed companies. The former remisier had placed fraudulent buy and sell orders in order to influence stock prices to benefit his trades in contracts for differences. This was the first securities fraud case jointly brought by the MAS and CAD following the integration of the market misconduct enforcement regime in Singapore (see our briefing of 1 April 2015 for further details). 

2. Members’ Surveillance Dashboard

The SGX will also be issuing a Members Surveillance Dashboard (Dashboard) to specific member firms which will contain statistics and information which may relate to market misconduct pertaining to that particular member firm. 

The Dashboard will include details on the number of alerts triggered in SGX’s real-time surveillance system with regard to potential market misconduct activities. It will also include information on the member firm’s ranking vis-a-vis its peers in the same industry based on the number of alerts attributed to the firm. 

The number of alerts does not itself indicate market misconduct or the quality of trading controls at member firms. However, it is likely that the SGX and MAS will expect the member firms to review the data further and conduct their own investigations. The member firm would then be able to make the appropriate enquiries of remisiers or clients around suspicious activities, and halt trading where necessary. 

The MAS may also consider the Dashboard statistics and response of a particular member firm in assessing the quality of that firm’s trading controls. Further, if a particular alert does trigger an investigation by MAS-CAD, the member firm’s controls will also come under additional scrutiny. 

The SGX stated that the first Dashboard would be released to brokerages in the week ending 30 September 2016 and would cover alerts generated from April to August 2016. Subsequent Dashboards will be released on a quarterly basis from January 2017. 


The launched initiatives will complement SGX’s existing real-time trade surveillance, member firm inspections and enforcement actions. Although SGX currently already discusses any unusual trading behaviour with member firms on a regular basis, the initiatives provide further detail and context to assist member firms in taking a closer look at their trading controls and practices at an early stage. The MAS will also likely have an expectation that the member firms incorporate the relevant guidelines into their surveillance programmes, and take timely action to address any perceived weaknesses in controls or suspected market misconduct.

If you wish to discuss this further, please do not hesitate to contact Siddhartha Sivaramakrishnan, William Hallatt, Matt Emsley, Grace Chong, or your usual contact.  


Herbert Smith Freehills LLP is licensed to operate as a foreign law practice in Singapore. Where advice on Singapore law is required, we will refer the matter to and work with licensed Singapore law practices where necessary.