SGX changing calculation of minimum trading price

SGX changing calculation of minimum trading price

The Singapore Exchange (SGX) will change the methodology used to determine whether a company's share price meets the 20-cent minimum trading price (MTP) rule.

The change is to align the calculation methodology with that of international data companies, and will take effect immediately.

It comes after SGX extended to Sept 1 the review of the six-month volume weighted average price (VWAP) of shares for firms that have consolidated their shares to comply with the rule before March 1.

The rule requires all mainboard-listed shares to have a minimum price of 20 cents.

As at the end of last month, 86 of 181 companies likely to be affected by the MTP had either acted or announced plans to comply with the rule, aimed at reducing excessive speculation. Of the 86, a total of 57 completed share consolidation.

The SGX is also allowing another 20 companies, whose VWAP has fallen below 20 cents for the first time due to extreme market volatility last month, until Sept 1 to evaluate their options and take action to comply with the MTP rule.

"We have listened to feedback from the public and are adjusting the VWAP calculation methodology. The VWAP of the shares of companies will now reflect fully the impact of a completed share consolidation, said Ms June Sim, head of listing compliance at SGX.

"This will reduce the risk of companies having to consolidate shares at extremely high ratios, or for repeated corporate actions. We are also giving companies which might have been unduly impacted by the market volatility in January, time to react."

Veteran investor Mano Sabnani noted that it is "obvious that the computation the SGX has been using to determine the MTP - especially for companies that have already done their consolidation - did not take fully into account the consolidation that had been done".

"They have given respite to the companies that have already consolidated their shares for that reason. That's why they extended the deadline to September," he said.

The VWAP of shares following a share consolidation will now be computed using historical prices adjusted for the consolidation ratio.

Previously, the VWAP was calculated based on the total value of securities traded for the six months under review divided by the total volume traded for the six months.

But a bigger concern is looming, especially as more firms' share prices may dip below 20 cents as long as the bear market continues, Mr Sabnani cautioned. With the deadline for the first review less than a month away, it appears many of the 95 firms yet to take any action or announce any plan to comply with MTP may end up on the watch list.

"It is not good for the exchange to have so many companies on the watch list," he said. "The calculation of the MTP post consolidation was in error. So for the sake of all affected companies, they should just push back the deadline to Sept 1."

This article was first published on Feb 3, 2016.
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