SINGAPORE — A minimum price of 20 cents for mainboard counters, reduced lot sizes and the end of contra trades are some of the major changes that will take place over the next two years in the way shares are traded on the Singapore Exchange.
The wide range of initiatives was laid out by the Monetary Authority of Singapore (MAS) and Singapore Exchange (SGX) yesterday, following a three-month public consultation process that ended on May 2.
The move to strengthen the securities market and promote better trading practices comes in the wake of the dramatic fall in share prices of three mainboard-listed stocks last October, which wiped out a combined S$8 billion in their market value over three days.
The proposed measures, to be implemented starting at the end of this year, will help further enhance the robustness and resilience of Singapore’s securities market and instil greater investor confidence in its marketplace, said Mr Lee Boon Ngiap, assistant managing director for capital markets at MAS.
Stocks listed on the mainboard will be required to have a minimum trading price of 20 cents come March next year, in a move that will affect about 200 companies whose share prices currently fall below the threshold. They will be given a 12-month transition period to “undertake corporate actions” to meet the new requirement, such as through share consolidation.
“This is to address risks of low-priced securities being more susceptible to excessive speculation and potential market manipulation,” the MAS and SGX said in their joint statement.
And to promote financial prudence, investors will be required to post a minimum 5 per cent of collateral before trading in stocks. The measure, targeted for implementation in mid-2016, puts an end to uncollateralised contra trading as it is currently practised.
However, institutional investors, trades settled through delivery-versus-payment mode, and funds from the Central Provident Fund and Supplementary Retirement Scheme will be exempted from this requirement.
Mr David Gerald, president and chief executive of the Securities Investors Association Singapore (SIAS), said the measure will encourage investors to trade within their means.
“Many investors are used to trading without collateral, but that encourages gambling habits and sometimes over-gearing. I would expect a few to stay away when this is implemented, but over time when the market gets used to this practice, they will come back.”
In addition, to improve retail investors’ access to a broader range of listed securities, particularly the higher-priced blue chips, SGX will reduce the board lot size from the current 1,000 shares to 100 shares next January, a move that the SIAS also lauded.
“This is a very encouraging move because, right now, small investors can’t participate and build a portfolio involving blue chips. So by allowing them to buy 100 shares at a time, it helps them to build a portfolio of good shares, shares that will perform and are able to give good dividends,” Mr Gerald said.
From the middle of 2016, short sellers will be required to notify the MAS of their net short positions based on the lower of 0.05 per cent or S$1 million worth of shares in a listed entity. The aggregated short positions will be published weekly in a move that Mr Gerald said will help investors to make informed trading decisions.
Other initiatives announced by the MAS and SGX yesterday include improving the transparency of intervention measures. The Securities Association of Singapore will develop industry guidelines for its members to address concerns resulting from differing practices of trading restriction announcements, with expected implementation by the end of this year.
Independent advisory, disciplinary and appeals committees for listings will also be set up by early next year, the MAS and SGX said. They will expand the range of regulatory sanctions for listing rule breaches to include powers to impose fines on issuers, restrict the activities that issuers may undertake, as well as to make offers of composition for minor, administrative or technical breaches.