More safeguards for trading of newly consolidated stocks

Pedestrians walking past the SGX Centre on Jan 21, 2015.
Pedestrians walking past the SGX Centre on Jan 21, 2015.PHOTO: BLOOMBERG NEWS

The Singapore Exchange (SGX) is introducing added safeguards for the trading of newly consolidated shares, following several error trades and feedback.

It will now display "cum-entitlement" (CE) and "ex-entitlement" (XE) indicators on stock price pages. The indicators will be shown under the "remarks", or "RMK", column of the stock price pages.

They will serve as an additional reminder to investors that a stock is about to undergo, or has just undergone, a corporate action, SGX said in a statement.

The local bourse has seen a spate of share consolidations as companies move to comply with a rule requiring mainboard-listed firms to have a historical six-month volume-weighted average stock price of at least 20 cents.

The SGX will also introduce a reference price for newly consolidated stocks. This price will be made available to brokers via market feeds from the SGX.

It will be derived from the last traded price of the pre-consolidation trading counter adjusted for the consolidation or split ratio and cash distributions.

In cases where this may be inappropriate, such as if multiple corporate actions are effective on the same date, SGX may choose another means of determining the reference price. It will inform brokerages about such means in this event.

Last week, SGX cancelled 91 "error trades" involving 52.3 million shares of New Silkroutes Group.

Market participants said New Silkroutes shares had been mistakenly matched at around 1.5 cents close to the opening bell last Wednesday, the first day the company was trading following a consolidation of every 500 shares into one.

Based on last Tuesday's closing price of 0.1 cent, each of the new shares should have been worth 50 cents. But more than 52 million shares changed hands in erroneous transactions that briefly wiped out almost all of the energy, healthcare and technology company's value.

Transactions that were done below 40 cents and up until 9.23am were eventually cancelled.

The SGX added in its statement that brokerages are to exercise care when executing orders in stocks which are undergoing share consolidation and splits.

A version of this article appeared in the print edition of The Straits Times on December 23, 2015, with the headline 'More safeguards for trading of newly consolidated stocks'. Print Edition | Subscribe