SGX mandates minimum allocation for retail investors and rethinks lunch break

THE Singapore Exchange (SGX) will mandate all mainboard companies to allocate to retail investors at least 5 per cent, or S$50 million, whichever is lower, of their initial public offering (IPO). This new rule will kick in from May 2, 2017.

This is to facilitate greater retail participation in Singapore's equities market, it said.

"If market conditions permit, we encourage companies to make available more shares than the floor to retail investors," said Chew Sutat, executive vice-president and head of equities and fixed income, SGX.

SGX received formal feedback from 20 respondents via a public consultation which ended in March 2016. Informal engagements with stakeholders were also held to gather feedback.

Separately, SGX also announced that it is consulting the public on proposed adjustments to the equities market structure. Its three proposed adjustments are:

 Increasing the minimum bid size for stocks and relevant securities trading in the S$1.00 to S$1.99 (from the current S$0.005 to S$0.01) range;

 Widening of the forced order range for stocks and relevant securities; and

 Changing trading hours via a mid-day break from 12 noon to 1pm.

This confirmed a Bloomberg report in February which said that the bourse was looking at bringing back the mid-day break, as well as wider spreads for illiquid stocks.

The first proposed change is based on a decline in traded value in the S$1.00 to S$1.99 price range in recent years, and lower retail participation in that price range relative to those of other price ranges.

As for the second proposal to widen the forced order range from the current +/- 20 bids to +/- 30 bids, this was in response to market feedback to improve order entry efficiency.

On the suggested change in trading hours, market feedback indicates that while the benefits of continuous all-day trading (CAT) remain relevant, market participants prefer shorter trading hours.

The proposed one hour mid-day break from 12 noon to 1pm is re-timed from the previous mid-day break from 12.30pm to 2pm in effect before CAT was implemented in August 2011.

"The timing of the proposed mid-day break allows us to retain significant overlap in trading hours with key markets in Asia, which was one of the key intended benefits of CAT, and coincides with the generally lower trading activity of the day.

"During this break, market participants can continue to enter and manage their orders and SGX will publish an indicative equilibrium price based on the orders received in the order book to facilitate price discovery and enable investors to better manage their risks," SGX said.

The consultation will open till March 29, 2017. Feedback can be sent to Rules@sgx.com.