SGX calls for public feedback on scrapping minimum trading price

The Singapore Exchange Regulation (SGX RegCo) is seeking public feedback on a proposal to scrap the minimum trading price (MTP) framework.

The rules that were adopted in 2016 and then modified in 2017 state 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 the criteria go on a watch list. They then have three years to raise their share price and their market cap or face delisting.

The proposal to scrap the MTP has been put up for public consultation until Dec 27 with a decision expected within the first half of 2020.

In the meantime, a moratorium has been placed on the three-year period for delisting companies now on the watch list. There will also be no new entrants added to it.

SGX data showed that 11 or so companies would have entered the watch list in the next review scheduled for early December.

Despite extensive feedback before the MTP was imposed, SGX RegCo chief executive Tan Boon Gin said on Wednesday (Nov 27): "We did not know how the implementation of MTP will play out, since then we have seen that there are unanticipated consequences that affected companies and therefore shareholders.

"Second, we have since developed tools and solutions that are much more effective in addressing possible manipulation."

The initial intent of the MTP was to address concerns that low-priced securities were more susceptible to potential market manipulation. This came in the wake of the penny stock crash that wiped out billions from the Singapore stock market in 2013.

But the SGX has since recognised that the MTP framework "is a blunt tool in addressing the risk of manipulation".

Its review found that 92 per cent of the 100 companies on the watch list have not been subjects of the "Trade with Caution" (TWC) alert and neither were suspected of stock manipulation.

The rule reversal will allow the market operator to avoid delisting up to 54 companies next June.

The SGX noted in the consultation paper that "delisting all companies on the MTP watch list is excessive and may be detrimental to investor interests".

Mr Tan noted: "One of the things we realised is that once you're placed on the watch list, you face certain business constraints such as difficulties borrowing from banks and developing business relationships.

"And there is always the real threat of delisting."

The SGX said that it has taken on other approaches and enhanced its tools to detect and prevent manipulation in a more direct, targeted manner.

For instance, the Trade Surveillance Handbooks and Members' Surveillance Dashboard were launched to raise awareness of market misconduct and set out guidelines to improve internal surveillance.

In August, the SGX and Monetary Authority of Singapore launched a guide to help firms develop and implement trade surveillance operations.

Mr Tan said: "I think what is important is that when measures do not work the way they were intended to work, we were willing to make changes along the way."