SINGAPORE

anonymous trading of large blocks of shares, will

not pose additional concerns on insider trading,

said the Monetary Authority of Singapore (MAS).

In a written reply yesterday to a parliamentary

question by West Coast GRC MP Ho Geok Choo,

MAS said that it recognises the lack of transparency

and possible market fragmentation that may arise

in trading via dark pools or crossing networks.

MAS added that regulatory frameworks are

already in place to address these issues.

Dark pools, whose transactions could affect

market prices, are relatively new in Asia, although

the alternative platform has been widely used in

the United States and Europe.

The Singapore Exchange (SGX) announced in

August last year that it is partnering with technology

company Chi-X Global to develop and launch the

first exchange-backed dark pool platform in Asia.

The move is expected to boost liquidity and

capital flows in the region as it will allow investors

to trade equities on the SGX and offshore exchanges

such as Australia, Japan and Hong Kong.

Crossing networks have been under the regulatory

regime on recognised market operators

since Sept 2007, MAS said. Under this rule, market

operators can only offer trading access to institutional

investors and must comply with statutory

regulations to ensure that the market is fair and

orderly, risks are managed prudently and they do

not act against public interest.

To enhance transparency, dark pools or crossing

networks are required to regularly submit trade

reports to the central bank and maintain an audit

trail of their trades, said MAS. Each trade should

also be reported to the SGX “to ensure consolidated

post-trade transparency”.

To prevent liquidity from being fragmented

in the local exchange, MAS said that crossing networks

are required to follow the current SGX limit

of orders above $150,000 or 50,000 shares for

off-exchange trades. Such transactions must also

be reported within 10 minutes of execution. MAS

has also set a limit on the volume that any crossing

network can trade in any single SGX-listed share.

MAS said SGX is responsible for the detection

of irregular trading and following up on suspicious

trades as part of its surveillance and enforcement

work. After initial investigations, SGX can refer relevant

cases to MAS, which has the statutory powers to

obtain information including an investor’s identity.

MAS added that it will continue to monitor the

development of crossing networks in Singapore

and global regulations relating to dark pool entities

and review the regulatory regime if needed.

The SGX and Chi-X Global dark pool trading

platform is targeted to be operational by the first

half of 2010 and will operate in accordance with

regulatory approvals and controls, reporting, settlement

systems and compliance standards. The

Central Depository will clear SGX stocks.