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SGX offers leniency on minimum trading price after January volatility; tweaks rule's formula

Tuesday, February 2, 2016 - 18:26
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The Singapore Exchange (SGX) will grant about 20 mainboard-listed companies an additional six months to meet the coming minimum trading price requirement in light of market volatility in January, the market operator announced on Tuesday.

THE Singapore Exchange (SGX) will grant about 20 mainboard-listed companies an additional six months to meet the coming minimum trading price requirement in light of market volatility in January, the market operator announced on Tuesday.

The SGX will also change its formula for calculating the minimum price to adjust for share consolidations. Doing so will align the formula with "international data companies", the SGX said.

It said that about 20 companies have experienced for the first time a dip in their six-month volume-weighted average share price (VWAP) below the regulatory minimum of 20 Singapore cents due to extreme market volatility in January.

Those companies, which will be notified by the SGX directly, will have until Sept 1, 2016 to raise their prices above the threshold or be placed on a watch list. The current deadline for the rule, which only affects mainboard-listed companies, is March 1, 2016. Companies on the watch list for too low a share price will have three years to cure the breach or face delisting.

In terms of how the VWAP is calculated, the SGX said that it will now follow industry norms and adjust historical prices for share consolidations. Historical prices of a 10-cent stock that undergoes a 4-into-1 consolidation will therefore be adjusted as if the share was always a 40-cent stock, for example.

This means that companies will enjoy the full impact of any share consolidation immediately, instead of having to wait a few months or having to consolidate more aggressively in order to offset unadjusted historical prices.

As at end-January, 86 of 181 companies that are likely to be affected by the minimum trading price have either acted or announced plans to comply, the SGX said. Of the 86, 74 have decided on share consolidation, of which 57 have completed the consolidation.

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