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SMCCA to SGX: Minimum Trading Price will not increase market liquidity

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SINGAPORE'S Small and Middle Capitalisation Companies Association (SMCCA) believes that Singapore Exchange's (SGX) proposed adoption of a Minimum Trading Price (MTP) will add "no meaningful value to the capital markets" but instead reduce liquidity and add to listing cost. - PHOTO: BLOOMBERG

SINGAPORE'S Small and Middle Capitalisation Companies Association (SMCCA) believes that Singapore Exchange's (SGX) proposed adoption of a Minimum Trading Price (MTP) will add "no meaningful value to the capital markets" but instead reduce liquidity and add to listing cost.

In response to SGX's public consultation papers on minimum price and enforcement, the voice for small and mid-cap listed companies says that the move to peg MTP at 20 cents a share should not be implemented as it will have a "negative impact on market liquidity in addition to other unintended consequences".

It argues that MTP will not be an effective policy if it aims to minimise misconduct and abuse such as those seen during the infamous penny stocks saga involving stocks like Blumont, Asiasons, and LionGold.

"... MTP does not alleviate risk of high volatility nor reduce excessive speculation and market manipulation. Neither will MTP improve liquidity nor reduce market impact cost.

"Implementing MTP, however, will increase issuers' cost of listing on SGX and also confuse shareholders and investors especially if companies choose to consolidate shares. The potential outcome is further reduction in liquidity and even erosion of wealth," it noted.

It went on to speculate that this is an attempt by SGX to migrate small and mid-cap companies to the Catalist board and "hence the cost of monitoring to Catalist sponsors or maintain a thinly traded mainboard listing".

On enforcement, it believes that the objective of the regulators to introduce the various enforcement frameworks is to provide SGX with more regulatory powers towards issuers.

"However, SMCCA argues that SGX's role is to regulate its members and not issuers. The role of regulating issuers should remain with MAS (Monetary Authority of Singapore). This is in-line with what is written in the Securities and Futures Act," the association explained.

It raised the issue of SGX's independence in the various enforcement committees to be created under the proposal - a Listing Advisory Committee, a Listing Discipline Committee and a Listing Appeals Committee - as well as issuers' lack of access to these committees.

"The desire of SGX to regulate issuers through these proposed regulatory changes does not lie on sound legislative or logical claims, nor are they independent, fair and transparent enough. The regulatory role of issuers is better left to MAS. SMCCA's stance is that the enforcement measures and the widening of SGX's powers need to be radically reconsidered and not implemented in its current form," SMCCA added.