MAS and SGX Propose Measures to Strengthen the Securities Market
Following the penny stock fiasco last year, MAS and SGX has proposed some measures to enhance orderly trading and transparency.
The consultation paper can be found here:
Review of Securities Market Structure and Practices
Some key proposed changes include:
- Requiring customers to post a collateral of 5% on open positions by the end of the trade day.
- Reducing the settlement period by 1 day.
- Imposing a minimum trading price of $0.10 to $0.20 on SGX listed stocks.
- More rigorous short selling disclosure.
- Requiring trading restrictions imposed by securities intermediaries for securities listed on SGX to be announced through the SGX website.
- Reinforcing the SGX listings and enforcement framework
A summary can be found here:
Summary of Securities Market Structure and Practices Review
You may submit your feedback (by 2 May 2014) via email to [email protected]
Currently, around 31% of all trades on the market are from contra trading. Imposing a collateral requirement is a good thing as it not only reduces speculation, it also mitigates the risk of remisiers.
My view is that the 5% is inadequate. It should be increased and the amount should be posted even before a trade can be executed.
As for the minimum trading price, I think it doesn’t really matter. It is not so much that a stock is cheap that it ends up being manipulated. Rather, it is the absence of liquidity which makes it easy to manipulate. The illiquid stocks are illiquid due to their low market capitalization and lack of institutional interest.
Even if their shares are consolidated and trade at a higher price, they will still have low liquidity and be easy to manipulate.