FTT SGX Trading Rules 3 — Questions and Answers
Question 1: What is the role of an 'approved trader' on SGX?
- An individual registered with SGX and authorised to trade on the exchange on behalf of a trading member (Correct answer)
- Any individual with a brokerage account
- A trader who has passed the FICS examination only
- A corporate entity licensed to clear trades on SGX
Correct answer: An individual registered with SGX and authorised to trade on the exchange on behalf of a trading member
An approved trader is an individual who is registered with SGX and authorised to trade on the exchange's systems on behalf of an SGX trading member. They must meet SGX's fit and proper criteria and registration requirements.
Question 2: What is a 'structured warrant' on SGX?
- A derivative instrument issued by a financial institution giving the holder the right to buy or sell an underlying asset at a specified price (Correct answer)
- A government guarantee on a company's debt
- A type of preference share with special conversion rights
- A warrant issued as part of a rights issue by the listed company itself
Correct answer: A derivative instrument issued by a financial institution giving the holder the right to buy or sell an underlying asset at a specified price
Structured warrants are derivative instruments issued by financial institutions (not the listed company itself) that give holders the right, but not the obligation, to buy (call warrant) or sell (put warrant) an underlying asset at a specified price before expiry.
Question 3: Daily Price Limits (DPL) on SGX are designed to:
- Prevent excessive intraday price movements by setting upper and lower bounds around a reference price (Correct answer)
- Ensure all trades occur at the previous day's closing price
- Limit the number of trades per day to reduce volatility
- Set the minimum and maximum commission rates for trades
Correct answer: Prevent excessive intraday price movements by setting upper and lower bounds around a reference price
Daily Price Limits set a collar around a reference price within which trading is permitted. If the price moves beyond these limits, the trading system prevents orders from being executed outside the band, limiting extreme intraday volatility.
Question 4: What is an ETF (exchange-traded fund) on SGX?
- A fund listed and traded on SGX like a stock, tracking an index or basket of assets and tradeable throughout the day (Correct answer)
- A managed fund only available through banks
- A unit trust redeemable only at end-of-day NAV
- A government bond fund traded exclusively OTC
Correct answer: A fund listed and traded on SGX like a stock, tracking an index or basket of assets and tradeable throughout the day
ETFs are investment funds listed and traded on SGX during market hours like ordinary shares. They typically track an index, commodity, or basket of assets, and can be bought and sold throughout the trading day at market prices.
Question 5: What does 'short position disclosure' under SGX rules require?
- Persons with a net short position exceeding a threshold in a listed company's shares must disclose that position (Correct answer)
- All short sellers must disclose every individual short sale immediately
- Short selling is prohibited on SGX without exception
- Only institutional investors need to disclose short positions
Correct answer: Persons with a net short position exceeding a threshold in a listed company's shares must disclose that position
SGX and MAS rules require persons who have a net short position in the shares of an SGX-listed company that exceeds a specified threshold (0.05% or S$1 million, whichever is lower) to disclose that position to SGX.
Question 6: What is a 'closing routine' on SGX?
- An auction process at the end of the trading day that determines the closing price through order matching (Correct answer)
- The process of reconciling all trades at end of day by CDP
- A period when only closing orders can be submitted to cancel positions
- The time when settlement instructions are sent to CDP
Correct answer: An auction process at the end of the trading day that determines the closing price through order matching
The closing routine on SGX is an auction mechanism at the end of the trading session where a closing price is determined based on the order book. Orders placed during the pre-close phase contribute to determining the final closing price.
FTT SGX Trading Rules 3
What is the role of an 'approved trader' on SGX?