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Naked Shorting - how to calculate buy price

Seems like so many unknown factors are involved...once shorted & buy-in, becomes meat under the cleaver?  

 

Hmm, observed before that when buying-in takes place, the stock price usually goes up. Why is this so, given that it is conducted in a seperate buying-in market?

 

From a seller's point of view, still wonder how it works.
Who gets to pocket the additional 2 bid?
(e.g. SGX? Whoever happens to be in Q at the 2 bid higher price?) 

 

 

Buying-in is carried out in a separate market, different from the regular board-lot market that you see on the online trading system. The buying-in bid price, as determined by CDP, will be 2 minimum bids above the highest of the closing price of the previous day, the reference transacted price or the reference bid price. For the purpose of this Rule, the reference transacted price and reference bid price will be any of the last transacted prices and bid prices between 10.45 am and 11.15 am, as determined by CDP.

During CDP buying-in, please note that if the shares are not bought in immediately in the buying-in market, CDP shall have absolute discretion to raise the price bid by 2 minimum bids, from time to time throughout the Market Day until they are able to buy-in the shares for you. If the securities cannot be obtained by the close of the second Market Day, CDP may require the short Clearing Member to procure the securities within the time stipulated by CDP.

 

If you are unable to cover back the short position on the same trading day, and if you do not have existing shares in the free balance of your CDP account on due date, SGX will regard the sale transaction as a short-sell and will conduct a buying-in on Due+1. You will not be able to buy back on your own on a subsequent day to cover this short-sold position as the due date of the purchase contract will be after that of the short-sold position.

There is a buying-in fee of S$30 levied on the Buy-in contract by SGX. The commission charged by SGX for the Buy-in contract will be 0.75%. You will need to settle any losses that were incurred from the buy-in.

Fyi, the above was extracted from Lim Tan Securitties FAQ. 

 

When such thing happen, the work is done in buying-in market. See CDP website info:

Buying-in Market

There is a high settlement success rate in the Singapore securities market. However, in the event of failed settlement, CDP steps in and closes off any outstanding position in the buying-in market. This is conducted on the day following due date. Buying-in is effected against the SGX-ST Member Company, which has executed the failed trade.

On the day of buying-in, CDP enters a list of securities to be bought-in into SESOPS at 11:15 a.m., naming the security, the number to be bought, the trade date and the price.

The price bid begins at two minimum bids above the closing price of the previous day, the current last transacted price or the current bid price, whichever is the highest. CDP will seek recovery of any loss in closing off an outstanding position from the respective Member Company. The Member Company will in turn seek recovery from its client. Settlement for the buying-in market is trade day. CDP retains the brokerage commission on the trade.

 

dnorm,

 

wah!! where did u naked SHORT ur counter?? SGX suppose to buy back at T+4 and at 2 bids above prevailing price around 11am or so leh..

tell me which counter and wat day u SHORTED w/o covering back....so we can analyse here...hee..

anyway contra a few last 2 days as well...gain abit...perhaps i will SHORT again TODAY...TGIFriday mah!! hee...

 

the feeling of wait during this period is really frustrating and will cost sleepless night...even at the end u win the trade after shorting the counter...u get a nervous wreck still...can't predict the future down tt few days yea`

 

happens to me too when the counter i shorted halt trading for the weekend. not a very nice feeling waiting. trust me. agreed with synnexo T+3 closing & T+4 opening (which ever is higher) + 2 bid. so normally ppl buy 1 lot to sell down b4 EOD but still can't fight X deal.

 

thanks all. wah..seems like different brokers practise different methods. tough, better siam away from shorting from now on, not for faint-hearted.. 

 

Think nickyng can help to clear your query better...

 

Hmmm...to my understanding, it should work in this way:

T+3 closing price & T+4 opening price -> whichever higher + 2 bids.

But then, some brokers told me that they buy in at T+4 at around 1130am.

 

I believe they execute the buyback at a certain time (11am?) of that day, plus +/- 2 bids  ...

 

Last week shorted a counter at 0.5, could not cover back on same day, so became naked short. Awaiting sgx buy back. lucky market spiralled

and counter fell to 0.42 on the day sgx supposed to buy back. But shocked to discover that the buy back price was 0.49!!!!

how do they calculate these things???? any idea, anyone?

tsk...I suppose this should be common knowledge to all shi fu here, but i still learning dah..... will appreciate advice...