02 August 2014

SGX To Impose Tighter Rule Next Year (2015) - Aug 2014

Singapore Stock Exchange and Monetary Authority of Singapore (MAS), agreed on a number of changes including minimum trading prices, new collateral rules, short-selling reporting, and new independent committees to examine listing applicants and impose regulatory sanctions.

From March 2015, Singapore will have a minimum trading price of $0.20 for main board-listed issuers and a transition period of 12 months. 

The new rules will impact about 220 companies out of about 800 listed on SGX, but regulators expect most companies to comply through “share consolidation” during the transition period, after which there will be a grace period of three years. 

“This is to address risks of low-priced securities being more susceptible to excessive speculation and potential market manipulation,” MAS and SGX said in a statement. 

My Notes

From recent SGX quarterly report, we learnt that the trading volume and value of securities have been in a decline after the scandals of 3 counters - blumont, liongold and asiasons October last year. Thousands of investors and speculators lost their money in these 3 counters, some even suffered more than 90% losses. 

With the new rule in place, the investors have to put in at least 5% collatoral before they are allowed to trade in the stock market. With the main board listed stocks to be traded above 20cents, I believe there will be lesser speculators that wish to earn more percentage from range 0.190 to 0.205. 

Nonetheless, I believe there will be lesser speculation on Singapore stock market as for those who love to trade hot counters,  they will have to have some cash or shares in CDP before they are allowed to perform a contra. Contra here means that the investors are allowed to buy shares without cash upfront, and they can do a sell off within T+3. They can then calculate the difference of net buy and sell amount to determine whether they are in contra gain or contra loss. They will receive contra gain later or they will have to pay for the contra loss back to the securities firm. 

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