WE refer to the article 'Good governance means having no blind spots' (BT, July 3).

The notion that proprietary trading creates a false impression of demand because of differential commission payable on such trades is inaccurate and unwarranted.

'Proprietary trading' is driven by a diverse range of activities including hedging, arbitraging and speculation. These are similar to the motivations behind trades conducted by other market participants. Thus, there is no rational basis to distinguish trades conducted by proprietary traders and other participants.

As the market regulator, the Exchange has consistently maintained a robust regulatory framework, adopting rigorous market surveillance and enforcement to sustain an enduring marketplace. In discharging its regulatory function, SGX scrupulously queries brokers and their trading representatives, whether local or foreign, when unusual trading activity is detected. Significant resources are deployed into detecting and investigating market misconduct.

As a matter of necessity, information on the progress of any inquiries is kept confidential to avoid compromising ongoing investigation. The Exchange takes a stern view of all forms of manipulative behaviour and works closely with the relevant regulatory authorities to uphold fair, orderly and transparent markets.

We will continue to publish our enforcement actions as appropriate, for all regulated entities including member firms and listed companies, on SGX website and via SGXNET announcements.

The issue of unusual activity near the close of trading was explicitly addressed by the Exchange in its Regulator's Column dated December 4, 2008, in which brokers and their representatives were reminded to be alert to such misconduct.

Mohamed Nasser Ismail
Vice-president & head of enforcement/regulatory policy, risk management and regulation group
Singapore Exchange

BT's Editor replies: Feedback from dealers and retail investors suggests that they would indeed find it useful to have details of the volume of proprietary trades, on which zero or only token commissions are payable - particularly when volume is very high and price movements are very small

This article was first published in The Business Times.