KUALA LUMPUR: Bursa Malaysia Bhd is probing an incident of one particular investor, who was trapped in a short position involving about eight million shares of 56 counters, for possible breaches of short-selling regulations.
Bursa Malaysia confirmed The Edge Financial Daily front-page report yesterday of an unusually large scale buy-in exercise involving the shares of the counters. The unusually massive buy-in programme caught many brokers, dealers and remisiers by surprise.
Observers said such short-selling activities might have gone largely unnoticed if the seller had not failed to deliver the shares or had managed to cover the positions on the very day of the short-selling transactions.
Even the authorities in the United States are probing short-selling activities stemming from the spread of rumours and are tightening rules to ensure the markets are not manipulated.
“We are currently investigating this matter and where our investigation reveals a breach of rules, we will take the necessary enforcement actions,” Bursa Malaysia chief regulatory officer Selvarany Rasiah in response to queries from The Edge Financial Daily yesterday.
“We can confirm that there was a buying-in on Bursa Malaysia’s Buying Board on Tuesday for a total of 7,998,200 shares involving 56 counters; which involved a single client of a participating organisation (a broker).
“It arose as a result of the selling client’s failure to deliver the said shares on the delivery due date which resulted in Bursa Malaysia Clearing House instituting a mandatory buying-in to fulfil the delivery,” she said.
The buy-in involved prominent KLCI stocks, which included Public Bank Bhd, MISC Bhd, Tanjong Plc Multi-Purpose Holdings Bhd, Carlsberg Brewery Malaysia Bhd, Malaysian Resources Corporation Bhd (MRCB), Zelan Bhd, Pos Malaysia Bhd, Unisem Bhd, RHB Capital Bhd, Star Publications Bhd, Kinsteel Bhd, Affin Holdings Bhd, SapuraCrest Petroleum Bhd, Proton Holdings Bhd, Sunway City Bhd and Sunrise Bhd.
Several counters including Pos Malaysia, Tanjong, Carlsberg, Star and Zelan were not among the 100-approved securities on Bursa’s regulated short-selling (RSS) list.
Selvarany reiterated that short selling was not permitted in the Malaysian market unless it was through RSS, permitted short selling or by an approved propriety day trader. She said the penalty the exchange may impose included reprimand, fines and other sanctions as deemed appropriate by the exchange.
“Bursa Malaysia has a duty to ensure an orderly and fair market and we are very committed to investor protection. We would like to assure the market that we take any forms of non-compliance to our trading rules seriously and will not hesitate to take the appropriate actions,” Selvarany said.
In a separate statement to the rest of the media, she said as a result of the delivery failure, the buying-in mechanism instituted by the Bursa Malaysia Clearing House was effected promptly, ensuring the delivery of the securities to the buyer on time and had no impact on the market.
“We have stringent rules in place to ensure delivery of securities to the buyer and the buying-in mechanism would deal with any instances of non-delivery by the seller,” she said, adding that under the buying-in mechanism, a mandatory purchase of the securities from the market would be instituted and the cost of the purchase for non-delivery would be borne by the short seller.
