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Singapore : SGX proposes more targeted MTP watch-list criteria with market capitalisation test.

Singapore Exchange (SGX) is proposing to make the entry criteria for the minimum trading price (MTP) watch-list more targeted with the addition of a market capitalisation test.

SGX has reviewed the current MTP criteria to assess if the objective of reducing the risk of excessive speculation and potential manipulation can be achieved in a more calibrated and effective way. Market feedback provided by stakeholders was also taken into account in the review.

SGX noted from the review that among companies with a 6-month volume-weighted average price (VWAP) of shares of less than S$0.20, those with market capitalisation of S$40 million or more showed better liquidity characteristics and lower volatility compared with companies with market capitalisation of less than S$40 million.

This thus suggests that the market capitalisation test as an MTP entry criterion will complement the existing requirement to more precisely achieve the goal of reducing excessive speculation and potential manipulation.

The consultation therefore proposes that a company is placed on the MTP watch-list if:

1. The 6-month VWAP of its shares is below S$0.20 and

2. Its 6-month average daily market capitalisation is below S$40 million

The SGX watch-list currently has two entry criteria: the MTP and the financial entry criteria. SGX is proposing to review companies every half-year instead of every quarter, for placement on the MTP and financial entry criteria watch-lists. This will align the review period with the 6-month look-back interval used to calculate VWAP. No other change to the financial entry criteria is proposed in todays consultation.

SGX will not place new issuers onto the MTP watch-list until the exchange has considered feedback to the consultation and finalised any change. Companies which entered the MTP watch-list at the 1 March 2016 review will remain on it pending any refinement to the requirement. Existing MTP issuers may continue to exit the watch-list if their 6-month VWAP is at least S$0.20.

Any change in the requirement is expected to be implemented by June 2017.

The MTP requirement remains relevant to addressing the risks associated with lower priced securities. We have been considering market developments and feedback in the implementation of the requirement and made refinements along the way. We are now proposing further refinements to make it more targeted and effective, said Tan Boon Gin, Chief Regulatory Officer at SGX.

Other refinements to the MTP rule since it was introduced in March 2015 include giving some companies affected by market volatility more time to comply with the rule, and changing the way the VWAP of shares is calculated such that it fully reflects the effects of a share consolidation.

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Publication:Mena Report
Date:Aug 24, 2016
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