Why Singapore Exchange Wants To Widen Bids?
Singapore exchange wants to make major changes in stock trading practices in order to boost trading further. Some of the proposals include a one hour lunch break and increasing the bid sizes to increasing trades at the exchange. The public will be consult on the implementation of these plans.
If they are implemented, there will be a major upheaval in the working of the Singapore exchange which will be beneficial for traders in the long run. This move will greatly profit small investors. It could also help in balancing the prevailing market conditions and bring more stability and diversity to the exchange.
Lunch break is back
One of the primary proposals listed here is to re-introduce the mid day breaks in the stock markets. The trading break or lunch break will extend from 12 pm to 1 pm. The lunch break was earlier a 1.5 hours trading break that lasted from 12:30 pm to 2 pm. It was scrapped in March 2011, citing that it could help in boosting the trades by as much as 10 percent. Since then, the scrapping has produced little effect on trading during the lunch hours, making the SGX bring it back on the table.
This is not all; the tick size of securities could be increasing from half a cent to 1 cent soon. This will only be applicable to the companies that have stocks that usually trade in S$1 – S$1.99 range. To reduce the number of error trades, the exchange may also opt for a broader forced order range, which will now go to 30 bids. It was 20 bids earlier.
In line of the new changes that the exchange is making, the companies listed on the exchange may now have to ensure that they keep at least S$50 million or 5 percent of their equity with the small investors. The companies will have to follow this mandate. Following either of the two conditions- whichever is lower, to ensure their listing.
Encouraging retail participation
The exchange is trying to make retail participation more commonplace in the market. The mandate will come into effect on 2nd May this year. However, this is lower than the limit prescribed in 2016 where the companies were to maintain S$100 million or 10 percent of their stock, whichever is lower, with smaller retail investors.
Loh Boon Chye, the CEO of SGX, said that the market is always reviewing its policies and rules to account for the dynamic trading conditions and is open to change. The recent changes proposed by the SGX could help in ensuring a bigger trade volume in Singapore and better retail participation as well.
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