• The first batch of 3 Singapore Depository Receipts (SDRs) represent the beneficial ownership interest in the underlying securities of Airports of Thailand (AOT), CP All (CPALL) and PTT Exploration & Production (PTTEP), which are constituents of the benchmark SET50 Index.
   
• Through the SDRs, investors are now able to gain access to an underlying security which is currently listed on an overseas exchange. Benefits of SDRs include gaining access to overseas-listed companies on the SGX, cost simplification, convenience, CDP custody, flexibility to convert the SDRs to the underlying security, and transparency.
   
• Investors in SDRs will be entitled to certain benefits attached to the underlying securities, such as dividend and other cash distributions.

New Singapore Depository Receipts (SDRs) launched on 30 May

SGX Group announced the launched of a new product, Singapore Depository Receipt (SDR) under the Thailand-Singapore DR Linkage on 30 May. This marks the first exchange-level DR corporation in ASEAN, demonstrating an important step forward in enhancing regional connectivity.

The first batch of 3 SDRs to be launched are issued by Phillip Securities and represent the beneficial ownership interest in the underlying securities of Airports of Thailand (AOT), CP All (CPALL) and PTT Exploration & Production (PTTEP), which are constituents of the benchmark SET50 Index.

What are SDRs?

SDRs are instruments each representing beneficial interest in an underlying security listed on an overseas exchange. This means that investors are now able to gain access, via SDRs traded on the SGX, to an underlying security which is currently listed on an overseas exchange.

SDRs are classified as Excluded Investment Products (EIP), which are generally for retail investors who expect low to moderate likelihood of loss of principal investment amount, with generally smaller potential returns.

Some benefits of SDRs include:

1. Global Access – exposure to overseas listed companies through the SGX securities market as SDRs are traded on the SGX-ST
2. Cost Simplification – aside from the usual fees (local brokerage and exchange fees) similar to trading a stock, there are no additional overseas trading fees, forex fees, or management fees
3. Convenience – Trades during SGX-ST market hours and denominate in Singapore dollars
4. CDP Custody – SDRs are custodised with CDP, and you can access it via the SGX Investor Portal
5. Fungibility & Flexibility – investors will be able to convert between the SDR and its underlying securities through an issuance and cancellation process handled by the SDR issuer
6. Transparency – investors can obtain information on SDRs easily via the SGX and SDR issuer’s websites

Key features of SDRs

An SDR is issued for trading on the SGX securities market on an unsponsored basis by an intermediary – referred to as an “SDR issuer” – that does not have a formal agreement with the underlying company.

Each SDR represents a specific number of securities listed on an overseas exchange, and SDR issuers hold the underlying securities on trust (deposited with a custodian). The underlying securities are registered in the name of the custodian and held for benefit of the SDR issuer.

The SDR issuer then issues SDRs for trading on the SGX-ST, in accordance to SGX-ST market rules. The SDR and its underlying securities are fully convertible, facilitated by the SDR issuer. Terms and conditions are set out in a programme disclosure document.

Investors in SDRs (or SDR holders) will be entitled to certain benefits attached to the underlying securities, such as dividend and other non-cash distributions. SDR holders will receive the distribution in Singapore dollars in their Singapore bank account maintained with the CDP. Do note that the payment date for this will occur later than the payment date set by the underlying company. For non-cash distributions such as a corporate action, the SDR issuer will use reasonable endeavours to pass on the benefits of the corporate action to SDR holders.

Inaugural SDRs – Starting with Thai Underlying SDRs (Thai SDRs)

The first batch of SDRs to be traded on the SGX from 30 May are Thai SDRs, offering investors an opportunity to gain exposure to some of Thailand’s largest companies – Airports of Thailand (AOT), CP All (CPALL) and PTT Exploration & Production (PTTEP), which are constituents of the benchmark SET50 Index.

Source: SGX, Bloomberg (data as of 29 May 2023)

Thai SDRs are issued on Non-Voting Depository Receipts (NVDR) on shared of a company listed on the Stock Exchange of Thailand (SET). An NVDR is an instrument issued by the Thai NVDR Co. Ltd, a subsidiary of the SET, to facilitate trading by reducing barriers of foreign ownership limits. NVDRs are listed and traded on the SET, and carry the same prices and benefits as their underlying shares but do not carry voting rights – as such, SDR holders do not have any voting rights. SDR holders may exercise voting rights attached to the underlying securities by cancelling their SDR to take delivery of the underlying securities.

Key Risks of SDRs

Investors should take note of the key risks relating to SDRs, further details on the risks are set out in the SDR programme disclosure document, provided by the SDR issuer for the features, characteristics including a description of how corporate actions or distributions will be handled, as well as risks and other information. Some of the key risks are highlighted below:

• Market Risk – SDRs are subject to market, country, and company-specific risks, similar to investing in the underlying securities.
• Price Risk – The price of the SDR may not always track the price of its underlying securities in the overseas market and the SDR may trade at a premium or discount and is subject to wide fluctuations. It is possible that the trading of SDR on SGX-ST remains available even though trading of the underlying securities is halted or suspended.
• Forex Risk – The trading price of the SDR (SG$) and the underlying securities (denominated in a foreign currency) are different and value of distributions are subject to fluctuations in exchange rates.
• Liquidity Risk – The SDRs may be illiquid and trading in the SDRs may be stopped by the SGX-ST at any time
• Overseas Market Risk – Overseas markets are influenced by the political, economic, and social developments in the foreign jurisdisction, which may be uncertain and may increase the risk of investing in SDRs on foreign-listed securities.
• Risk Arising from Foreign Laws – The underlying securities of the SDRs may not be subject to the same disclosure standards that apply to investment products listed for quotation or quoted on an approved exchange in Singapore. There are associated risks from foreign laws that investors should take note of before investing in SDRs.

More Trading Information on SDRs

SDR are traded on SGX-ST GlobalQuote, SGX’s quotation board for international securities. As the SDR are not

listed on the SGX-ST, the SGX-ST Listing Rules do not apply. Similar to other securities traded on the SGX-ST, SDR are cleared and settled by CDP on a T+2 basis. CDP will conduct buy-in on short positions in SDR on T+2.

You can buy and sell SDR through your broker, in the same way you buy and sell shares traded on the SGX-ST. When trading of the underlying securities is halted or suspended in the overseas exchange, it is expected that trading of the SDR will be stopped. There may be a lag time between when trading in the NVDR to which the SDR relate is halted or suspended and when trading in the SDR is stopped. An announcement of any such stoppage will be made on SGX.

For more information, visit www.sgx.com/sdr.