Singapore is strengthening its securities rules to help restore investor confidence after a penny-stock slump erased $6.9 billion in market value of commodity companies over three days in October.
The regulators will impose a minimum trading price of S$0.20 for mainboard shares to reduce risks of low-priced securities being more susceptible to excessive speculation and potential market manipulation, according to a joint statement by the Monetary Authority of Singapore and Singapore Exchange Ltd. on Aug. 1. The city-state will reduce the lot size for transactions.
The regulators have been reviewing Singapore’s stock market structure since Blumont Group Ltd., Asiasons Capital Ltd. and LionGold Corp. tumbled at least 87 percent over three days in October. SGX, Southeast Asia’s biggest bourse, added circuit breakers in February to protect investors from excessive price swings.
This “will further enhance the robustness and resilience of our securities market and instill greater investor confidence,” Assistant Managing Director Capital Markets at MAS, Lee Boon Ngiap, said in the statement.
Other new measures include collection of a 5 percent collateral and reporting of short positions. To boost trading volumes, Singapore will reduce the lot size of listed securities in January to 100 shares from 1,000 shares currently, MAS and the exchange said in the statement.
The initiatives will be implemented in phases over the next two years, according to the statement. SGX will set up three committees to introduce a wider range of sanctions for breaches of listing rules, it said.
The measures “won’t prevent such fiascos from happening again,” said Gabriel Yap, a former broker who now manages his own investment advisory co., GCP Global Pte. “What authorities should do is ban trading of stocks that have been manipulated.”
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.
Singapore Exchange said July 31 fourth-quarter profit fell 12 percent to S$77.4 million ($62 million) from a year earlier as share trading volumes shrank following the penny-stock rout.