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Smaller Board Lot Promotions
This week saw the change of the minimum lot size from 1000 to 100 for SGX listed stocks.
I partially support this move, as it allows investors to buy shares of companies that might previously have been too expensive.
I personally feel there is no need to impose any restriction on lot size and the SGX should move towards trading of single shares, like what is currently practiced in the US markets.
Furthermore, the move to a 100 lot size will further reduce the liquidity in the unit share market.
In an age where everything is done electronically and you do not receive any paper certificates for the shares you own. there is no really need to specify any minimum size for each lot.
However, the existence of the minimum commission poses significant costs challenges for trading in 100 unit lot or even single unit lot.
The Curse of the Single Lot Order
Many retail investors do not execute their orders real time but put in their buy or sell orders on queue at a specific price. This is usually done at night due to their work commitments in the day.
With the reduction in lot size to 100 shares, there is always a slight risk that your order is filled by only 100 shares.
Imagine putting a sell order of 50,000 share at $0.20 and getting a partial fill of 100 shares at the end of the day.
That means you get $20 for your shares. After deducting the minimum commission of $25 and other CDP charges, you end up in the red and have to pay the brokerage firm for a sell order.
In order for the smaller board lot size to succeed, the minimum commission will have to be reduced or done away with.
Some of the brokerage firms are currently offering some promotions that can help to mitigate the scenario that I have just mentioned. Currently, the promotion period is only for two to three months. It is unclear what is going to happen after that. I hope sanity will prevail and the industry is able to come up with some fair commission structure in the future.
Anyway, here are the promotions that I’m aware of.
If you know of any more promotions, do let me know by commenting below.
All of the promotions below are only applicable if an order is filled for 900 shares and below. Please refer to their respective T&C for the fine print.
Philip Capital (POEMS) and Lim & Tan
If contract value is less than or equal to $3500, the minimum commission will be reduced to $10.
Promotion valid till end of February 2015.
UOB Kay Hian
If contract value is less than or equal to $3500, there will be a commission rebate of $15.
Promotion valid till end of February 2015.
OCBC Securities
30% rebate off brokerage commission rates or the minimum commission chargeable, whichever is higher
S$10 NTUC shopping voucher for a minimum of three small board lot trades executed in the month
Promotion valid till end of March 2015.
DBS Vickers
Flat commission of $9.88 for orders less than or equal to $3888.
Promotion valid till end of February 2015.