How SGX regulates brokers

ST, 8 Jun 2013

I understand SGX regulates my broker. Will this regulatory power cover all transactions I carry out with the broker, including CFDs? If I suffer losses due to a breakdown in my broker’s online trading system, will SGX act against the broker?

SGX has 25 Securities Trading Members (commonly known as brokers or brokerage firms) which represent investors in their buying and selling of shares and other securities and derivatives on the exchange. More information on the rules and requirements governing Trading Members of the securities market can be found in the SGX-Securities Trading Rules.

An important point for investors to note is that SGX’s regulatory powers over Trading Members cover only transactions of products conducted on the SGX. SGX is not in a position to investigate transactions executed on other markets though these products may also be offered by Trading Members to their clients. Products not covered by SGX rules and supervision include Contracts for Difference (CFDs) and securities listed on overseas markets.

In the case of securities listed on overseas markets, the rules and regulations of the overseas regulators would apply. The investor compensation regime, the Fidelity Fund which compensates investors who have suffered losses due to the default or insolvency of their Trading Member, covers only transactions on SGX. Investors should also be aware that when he or she appoints a Trading Member as a broker, the investor enters into a contractual agreement with the broker firm.

This agreement subjects the investor to certain terms and conditions and may cover issues such as compensation claims by customers against the broker firm, or the amount of commissions chargeable.

For example, if a customer incurs a loss from a transaction during the outage of a broker system, the matter will be covered by the customer’s contractual agreement, and the customer should approach the broker firm concerned for resolution. It is thus important that investors know their rights under these contractual agreements as well as the implications of the arrangements.


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