Singapore may introduce a minimum
price for mainboard shares and impose rules on collateral for
some trades after a slump in the stocks of three companies
erased $6.9 billion in market value over three days in October.
The city-state also may set up an independent listing
committee and boost enforcement, according to a joint statement
from the Monetary Authority of Singapore and Singapore Exchange
Ltd. (SGX) yesterday. The central bank has been reviewing its market
structure since Blumont Group Ltd. (BLUM), Asiasons Capital Ltd. (ACAP) and
LionGold Corp. tumbled at least 87 percent over three days in
October.
The declines spurred a 20 percent drop in Singapore equity
trading last quarter from a year earlier as brokerages
restricted investments in riskier small-cap stocks. SGX,
Southeast Asia’s biggest bourse, will add circuit breakers this
month to protect investors from excessive price swings. The
Straits Times Index has dropped 4.9 percent this year after
ending 2013 with the smallest gain among developed markets.
“The measures are aimed at orderly trading and reducing
the ability to manipulate a particular stock,” said Yin Mei Lock, a Singapore-based capital markets lawyer at Allen Overy
LLP. “They go a long way in doing that and will help all
retail investors.”
The regulators said they plan to reduce credit risks by
imposing minimum collateral on customers for both Singapore and
foreign-listed securities.
‘Fast-Changing’ World
Regulators worldwide have evaluated safeguards since the
May 2010 plunge known as the “flash crash” erased more than
$800 billion from the value of U.S. equities in minutes.
Exchanges in that country have implemented a limit-up/limit-down
initiative that prevents market makers from quoting shares at
prices deemed too far above or below current levels.
“Today’s world is fast-changing, and we need to strengthen
Singapore’s securities market to meet the expectations of
investors and companies,” Magnus Bocker, Singapore Exchange’s
chief executive officer, said in the statement.
Singapore also plans to shorten the settlement period to
two days from three by 2016 and impose more transparency for
short selling, according to the statement. So-called contra-trading accounted for 31 percent of market turnover in the year
ended in October, the regulators said. The exchange and central
bank have set a May 2 deadline for industry feedback on the
proposed changes.
Reduce Speculation
“The proposal to have a minimum trading price is something
the market will have to digest and helps reduce speculation,”
said Rachel Eng, joint managing partner of Singapore-based law
firm WongPartnership LLP. “Requiring collateral is a good step
as investors will have some skin in the game. Hopefully this
won’t damp trading.”
Nations around the world are cutting processing times,
giving investors faster access to cash when they sell stocks.
All European Union countries must settle trades in two days by
the start of 2015, and U.S. securities firms are considering
trimming settlement periods.
Starting March 3, Singapore Exchange will issue a “trade
with caution” announcement whenever companies can’t explain
queries on share trading, according to the statement. Companies
will also be required to inform the bourse when they’re in
takeover talks. The bourse will also cut its clearing fee for
stocks from May to 0.0325 percent of contract value from 0.04
percent, it said in a separate statement.
Singapore is Asia’s eighth-biggest stock market by value,
and the second-biggest when measured against the size of each
nation’s economy, according to data compiled by Bloomberg.
Declining Volume
Blumont, which invests in minerals and energy, had soared
more than 1,000 percent last year through the end of September
to lead gains on the FTSE Straits Times All-Share Index (FSSTI),
prompting the SGX to investigate the surge. The shares plunged
97 percent from an all-time closing high of S$2.45 on Sept. 30
to 7.1 Singapore cents.
Asiasons slumped 97 percent from its record close of S$2.83
on Oct. 1 to 9.8 Singapore cents. LionGold tumbled 92 percent
from its peak on Aug. 29 to 14 Singapore cents.
The proposals will help in “promoting orderly trading and
responsible investing” and “improving the transparency of
market intervention measures,” the central bank and exchange
said in the statement.
To contact the reporters on this story:
Jonathan Burgos in Singapore at
jburgos4@bloomberg.net;
Andrea Tan in Singapore at
atan17@bloomberg.net
To contact the editors responsible for this story:
Sarah McDonald at
smcdonald23@bloomberg.net;
Linus Chua at
lchua@bloomberg.net
Singapore May Add Trading Restrictions After Penny-Stock Crash
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