SINGAPORE (Nov 29): Singapore Exchange (SGX) is proposing a number of changes in the clearing and settlement of securities in the Singapore stock market, as part of its efforts to make the process safer and aligned with global practices.

In a Wednesday announcement, SGX outlines three proposed improvements for risk reduction, beginning with a shorter T+2 securities settlement cycle of two days instead of the current span of three days (T+3) to reduce counterparty risks market-wide, as well as securities and funds earlier for investors.

The move would also bring SGX up to par with the stock exchanges of Hong Kong, NYSE and the EU, which already operate on a T+2 cycle.

Another proposed change is to allow for securities and money settlements to take place simultaneously, which SGX says would iron-clad and enhance the two processes while reducing risk arising from the current time lag between them.

“Enhancement of various settlement processes” is the last improvement to be detailed under the proposed changes for risk reduction – which include the finalisation of central depository (CDP) cash payments and receipts through the Monetary Authority of Singapore’s (MAS) electronic inter-bank payment and fund transfer system MEPS+ or the MAS Electronic Payment System.

This example means that CDP will cash-settle on the Intended Settlement Day + 6 business days (ISD+6) any trade with failed delivery that is not resolved by then, which is in line with global standards and practices.

Separately, the bourse is also proposing that investors with shares in their CDP accounts have the option of their broker visibility of specific holdings. By creating a broker-linked balance of these holdings, the broker can thus offer more personalised services such as portfolio management services, says SGX.

“SGX has been actively engaging with stakeholders on the proposals for many months. We believe all these will benefit the market,” says Loh Boon Chye, CEO of SGX.

“The changes proposed today are aimed at reducing systemic risks and aligning the clearing and settlement processes of the Singapore market with global practices. They will also strengthen Singapore’s position as an international financial centre,” he adds.

Shares in SGX closed 4 cents lower at $7.47.