In one of my previous articles on Singapore Exchange’s minimum trading price (MTP) rule, I questioned whether the MTP framework will actually serve its intent of preventing market manipulations. Following that article, SGX recently proposed changes that will allow stocks with larger market capitalization to avoid the fate of being included in the watch list.
The MTP rule was implemented under SGX’s ex-CEO, Magnus Bocker’s era. Bocker’s tenure in SGX is generally viewed by many as negative because of the many unpopular changes he tried to implement. MTP was one of them, the other being the scrapping of the 90-minute lunch break to allow continuous trading.
Background of MTP
To his credit, Bocker did help to diversify SGX’s revenue stream through the expansion of derivative product offerings. However, he overlooked the importance of continuing to build the capital market portfolio for SGX. In addition, under his leadership, retail investors’ activities waned substantially. Of course it is not fair to put the entire blame on him for the lackluster market participation as economic climate plays a large part as well. But then again, as CEO, he did not implement any note-worthy initiatives to attract retail investors either.
It also did not help that many retail investors lost a lot of money after dabbling in Blumont, LionGold and Asiasons Capital. The three penny stocks surged to incredible levels within a short period of time and then dived spectacularly, prompting rumours of market manipulations. To prevent this sort of incident from happening again, SGX introduced the MTP in a bid to raise the quality of shares in the SGX.
From my point of view, current SGX CEO Loh Boon Chye needs to have a realistic and calibrated approach on this issue because the MTP rule alone will not magically leads to quality …Read more