Thursday, January 16, 2020

My first dumb trading move in 2020...

Occasionally, I do something that is so dumb that it's worth putting up a blog article to warn readers not to do the same thing as I did.

I am currently in the process of cleaning out my father's portfolio and slowly removing his less promising investments from the family portfolio. One of the items I was eager to get rid of is 80,000 shares in Neratel. So two days ago, I put a sell position on 80,000 of Neratel and cycled the position into an equivalent amount of Netlink trust - I needed my mum to get dependable dividends moving forward so I can afford only the safest investments moving forward.

This would have been fantastic move.... if only I actually had 80,000 shares of Neratel !

So I got a call from the broker the next day telling me that I sold stocks that I did not actually own in my CDP. This was the first time it has happened, and it was the shock of my life.

The broker then sent me an email explaining what happens when an idiot like me sells stocks he does not have in his CDP account.

  • SGX will attempt to buy back the stock with this idiot's account on due date and due date + 1. Due date being T+2 where T was the date the original transaction took place.
  • Here's the scary bit. If the buy-in on due date and due date+1 is unsuccessful, a penalty of 5% of the transaction value or $1,000 will be imposed (whichever amount is larger).
  • A buy-in fee of $80.25 will be imposed along with fees that scale with the size of the transaction.
  • SGX will slowly ratchet up the offer price by 2 minimum bids during the buy-in attempt.
So for the next two days, I was gritting my teeth and staring at Neratel stock. Adding to the suspense, Neratel was illiquid and there were several offers at $0.285. Making matters worse, my broker advised me not to buy into the counter proactively to lock in the price earlier because the settlement would be too late and SGX would still perform the buy-in on due date based on the rules they established earlier.

To make the long story short, this stupid attempt to trade Neratel cost me about $800-$1,000. The pain was bearable because the amounts were small compared to my greater portfolio and the past two days has been rather good for the stock market. Also, the results would have been more catastrophic if I did not have about $20,000 in my cash account - I initially wanted farm my proceeds into Netlink Trust, so now I have to pay for Netlink Trust using cash at T+2 !

Nevertheless, this amount of money would have gotten me several good meals in KL.

If I had simply opened my CDP account on a browser tab and made a quick check before I sold my stocks, I would have saved myself from a world of pain.

Anyway, please learn from my mistake and don't be like me ! 


  1. Hi Chris,

    I am confused. I thought you are selling your late father's Neratel shares?
    How did you end up naked shorting when you have the 80,000 shares owned by your Dad?


  2. If I remember, it took about a month or so for CDP to transfer share holdings...

    CDP will mail a letter to you when it's done. Part of the service for $10.70 fees per counter I suppose. Dunno if they now simply send email haha.

    One way to avoid all these fees & waiting time (especially if just a few shares) --- make sure you get hold of your relative's online brokerage a/c ID & password before he croaks. Just don't get caught trading a dead person's a/c!!!

    I guess you'll also need his/her online bank a/c details to get at that cash. ATM card with PIN also can hahaha!!!

    Also the established way to avoid paying estate duties for overseas a/c ;)

    PS: There's thousands of "dead" CDP accounts just left there & probably millions in bigger countries. Bet their family members did post mortem trading.

  3. You guys give me too much credit. It was a dumb mistake. My dad never had those shares. I thought he did but he sold them before he got hospitalised.

  4. Neratel putting up their building for sale. Didn't see this in their SGX announcement? Guess its not material.