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SGX Should Space Out Introduction of New Rules, Say Observers

SGX should space out introduction of new rules, say observers

The Singapore Exchange (SGX) has announced a slew of plans this week to improve trading processes, liquidity and transparency on the exchange. Some analysts see these as incremental changes to make the exchange more competitive in the long run.

But observers said that SGX should space out its efforts to introduce new rules as market players need some time to adopt the changes.

Analysts do not expect trading volumes to rise significantly once the proposed changes to cut bid size take effect on July 4. So far, industry reaction remains mixed as the new measures are expected to impact traders and market participants in varying degrees.

Under the new rule, investors can now bid for stocks that cost less than 20 Singapore cents each for as little as 0.1 cent. And stocks that cost above S$10 will have a minimum bid size of 1 cent – down from 2 cents currently.

Albert Fong, President of the Society of Remisiers (Singapore), said: “The pro are the people who are benefiting with the facilitating of arbitraging and hedging activities. Those who are feeling concerned are those who feel that there’s a loss of contra-trading opportunities, which may translate to lower trading volume in that particular segment.

“At the same time the reservation of the tight bids will allow them little opportunities, minimise their opportunities to make more profit strategies.”

Analysts said a lower bid size may also help penny stocks gain more exposure and invite hedge funds to come into the market.

Industry players generally welcomed SGX’s efforts but some are cautious on the pace of new measures being introduced on the bourse. For one, SGX’s proposal to change voting procedures at general meetings is viewed by some observers as unnecessary and costly.

The Singapore Exchange (SGX) is seeking public feedback on proposals to require listed companies to hold general meetings in Singapore as well as conduct their voting by polls instead of show of hands.

Investor Vincent Chen who has attended a number of general meetings, said: “The only thing you gain from this – at considerable expense and inconvenience – is how many voted for or against. In most cases, you will have 90 per cent who will vote for and very few against because the major shareholders will be voting for the resolutions.”

Mr Chen said that while many big companies have adopted electronic polling, voting by hands has offered an efficient process where shareholders and management can easily pass resolutions with no need for third party scrutiny.

Quite often at general meetings for smaller companies, there is a higher level of participation from retail shareholders because the bigger investment funds would normally have access to management, he said.

Liu Jinshu, an Investment Analyst with SIAS Research, said: “If the SGX were to make changes too fast, it might not actually be a good thing. Firstly, if there are too many changes for investors to adapt to, it might put them off.

“Secondly, putting too many changes together is harder for SGX to observe the effects of these changes and see how successful (they are) and how they can improve upon them.”

Still, some market observers believe the SGX is on the right track to encourage more investors to trade.

Robson Lee, a Partner with Shook Lin & Bok LLP, said: “With the proposed publication of the real time indicative equilibrium prices, you would help investors to be able to make better judgment as to what is the indicative price at which trades will take place. Therefore, you have a better sense of demand and supply and you can price your trades accordingly.”

Some analysts said randomising the end of the pre-close phase for a varying duration between four to five minutes may also lessen major spikes in stock prices due to large volumes of shares being traded in the last minutes of market close.

For now, analysts say many traders are likely to maintain a wait-and-see approach.

Adapted from CNA (By: Millet Enriquez)

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