SGX plans to cut bid sizes, raise forced order range
Feedback sought on changes; tighter bid-ask spreads seen boosting trading
By CHEW XIANG 02 September 2009
(SINGAPORE) The Singapore Exchange is calling for public feedback on its plan to slash minimum bid sizes and increase the forced order range.
SGX said that for shares priced above $10 apiece, the bid size should be halved to one cent, from two cents now.
For stocks priced between $1 and $2, the minimum bid size will now be half a cent, from one cent previously, while penny stocks below 20 cents can move in steps of 0.1 cent, instead of 0.5 cent now. Stocks priced in the other ranges will not see any change to their bid sizes.
‘Lowering bid sizes will allow investors to quote at more optimal levels, resulting in tighter bid-ask spreads and, consequently, lowering the investors’ costs of trading,’ SGX said in a statement yesterday.
‘The move is expected to increase market liquidity. It will also align SGX’s minimum bid sizes in the selected price ranges with that of other major Asian exchanges, enhancing SGX’s competitiveness.’
One dealer said the change should encourage greater trading activity especially given the rise of programmed or algorithmic trading.
Average spreads in Singapore are perhaps 50 per cent higher than other key exchanges in the region, according to an Aite Group report in June, citing data from Morgan Stanley.
The average spread here is about 37 basis points, according to the report, compared to 25 bps in Japan’s Tokyo Stock Exchange, 22 bps in Hong Kong, 23 bps in Korea and just 16 bps in the Australian Securities Exchange.
The SGX is also proposing to change the minimum bid size for debentures from 0.1 cent to either one cent or 0.1 cent, similar to the present regime for exchange traded funds (ETFs). This will give it the flexibility to implement a higher bid size for higher priced debentures, the SGX said.
As well, it is prescribing a wider forced order range, from 10 bids at present, to 20 bids for securities. For ETFs and debentures, SGX is suggesting a change from 30 bids to 300 bids.
The forced order range is a pre-execution mechanism to prevent error trades, by requiring orders placed at prices outside the range to use the forced key function. The forced order range has been widened to complement the reduction in minimum bid sizes, SGX said.
The exchange last cut minimum bid sizes in December 2007 - for instance, the minimum bid size for stocks above $10 had been 10 cents - in an effort to reduce trading costs.
SGX said that had resulted in a notable cut in the bid-ask spread, a notable decline in the quantity quoted at the best price, greater resilience in a downward market and better price discovery.
Submissions can be sent to the exchange via email to rules@sgx.com, or addressed to Gavyn Pang, Regulatory Policy, at the Singapore Exchange, before Sept 21.
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SGX plans to cut bid sizes, raise forced order range
Feedback sought on changes; tighter bid-ask spreads seen boosting trading
By CHEW XIANG
02 September 2009
(SINGAPORE) The Singapore Exchange is calling for public feedback on its plan to slash minimum bid sizes and increase the forced order range.
SGX said that for shares priced above $10 apiece, the bid size should be halved to one cent, from two cents now.
For stocks priced between $1 and $2, the minimum bid size will now be half a cent, from one cent previously, while penny stocks below 20 cents can move in steps of 0.1 cent, instead of 0.5 cent now. Stocks priced in the other ranges will not see any change to their bid sizes.
‘Lowering bid sizes will allow investors to quote at more optimal levels, resulting in tighter bid-ask spreads and, consequently, lowering the investors’ costs of trading,’ SGX said in a statement yesterday.
‘The move is expected to increase market liquidity. It will also align SGX’s minimum bid sizes in the selected price ranges with that of other major Asian exchanges, enhancing SGX’s competitiveness.’
One dealer said the change should encourage greater trading activity especially given the rise of programmed or algorithmic trading.
Average spreads in Singapore are perhaps 50 per cent higher than other key exchanges in the region, according to an Aite Group report in June, citing data from Morgan Stanley.
The average spread here is about 37 basis points, according to the report, compared to 25 bps in Japan’s Tokyo Stock Exchange, 22 bps in Hong Kong, 23 bps in Korea and just 16 bps in the Australian Securities Exchange.
The SGX is also proposing to change the minimum bid size for debentures from 0.1 cent to either one cent or 0.1 cent, similar to the present regime for exchange traded funds (ETFs). This will give it the flexibility to implement a higher bid size for higher priced debentures, the SGX said.
As well, it is prescribing a wider forced order range, from 10 bids at present, to 20 bids for securities. For ETFs and debentures, SGX is suggesting a change from 30 bids to 300 bids.
The forced order range is a pre-execution mechanism to prevent error trades, by requiring orders placed at prices outside the range to use the forced key function. The forced order range has been widened to complement the reduction in minimum bid sizes, SGX said.
The exchange last cut minimum bid sizes in December 2007 - for instance, the minimum bid size for stocks above $10 had been 10 cents - in an effort to reduce trading costs.
SGX said that had resulted in a notable cut in the bid-ask spread, a notable decline in the quantity quoted at the best price, greater resilience in a downward market and better price discovery.
Submissions can be sent to the exchange via email to rules@sgx.com, or addressed to Gavyn Pang, Regulatory Policy, at the Singapore Exchange, before Sept 21.
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