SGX RegCo to scrap minimum trading price rule on June 1

SGX RegCo said it received broad support from market participants to scrap the minimum trading price rule.
SGX RegCo said it received broad support from market participants to scrap the minimum trading price rule.PHOTO: ST FILE

SGX RegCo, the regulatory arm of Singapore Exchange, said it will scrap the requirement for companies to maintain a minimum trading price (MTP) on June 1.

The MTP rule was adopted in 2016 to deter share price manipulation. It states that a mainboard-listed company must maintain a six-month volume-weighted average share price of 20 cents and a six-month average daily market capitalisation of at least $40 million.

Companies that do not fulfil those criteria go on a watch list and are given three years to raise their share price and market cap, or face delisting.

SGX RegCo now believes the rule is not required since implementation of a series of other tools - including the enhanced Trade with Caution alerts and Members' Surveillance Dashboard - has reduced the risk of manipulation.

"The shares of most of the issuers in the MTP watch list have not been found to be manipulated. Yet these issuers are subject to risk of a delisting as a result of the MTP rule. Issuers on the MTP watch list have also faced challenges in borrowing from banks and developing business relationships," SGX RegCo said in a statement yesterday.

The proposal to scrap the MTP was put up for public consultation late last year and SGX RegCo said it received broad support from market participants.

The MTP watch list will cease to exist on June 1 and mainboard-listed companies on the list will no longer need to satisfy the exit criteria and apply for removal from the MTP watch list, it said.

A spokesman for the Monetary Authority of Singapore (MAS) said the central bank supports SGX RegCo's decision to remove the MTP requirement.

"MAS and SGX RegCo have taken a more pre-emptive and targeted approach to address the risk of market manipulation," the spokesman said in an e-mail sent yesterday.

Several measures have been introduced in the past few years to address the risk, including trading restrictions on accounts involved in unusual activities in a stock and issuing alerts to the investing public to trade in certain stocks with caution, MAS said.

 
 

The Members' Surveillance Dashboard can now also alert SGX members to potential market misconduct relating to a member's trades.

In addition, SGX Trade Surveillance Handbooks and the MAS-SGX Trade Surveillance Practice Guide provide guidance to help brokerage firms improve their capabilities to detect and curb undesirable trading behaviours and disrupt potential market abuse as early as possible, MAS said.

"MAS and SGX RegCo have also stepped up enforcement actions against market manipulation, and continue to work closely to enhance our toolkit to detect and deter market manipulation," the MAS spokesman said.

A version of this article appeared in the print edition of The Straits Times on May 12, 2020, with the headline 'SGX RegCo to scrap minimum trading price rule on June 1'. Subscribe