Boosting liquidity: fundamental rethink needed

IT WOULD not be an exaggeration to describe conditions in the local stock market as extremely dire, possibly the worst they have been since the US sub-prime crash of 2008. The Straits Times Index is down 15 per cent for the year, which is bad enough, but perhaps more troubling is the steep drop in liquidity with daily averages now regularly below S$1 billion, the bulk of this being generated by trading in the 30 index components.

Speak to brokers and the message is clear - these are desperate times for the industry. There is plenty of anecdotal testimony that an increasing number of trading representatives are throwing in the towel and exiting the profession. Can anything be done to try and improve this? The answer is "maybe" but it would take a fundamental rethink of existing practices.

First, the Singapore Exchange (SGX) could reconsider its removal of the cap on its clearing fee for contracts above S$1.5 million, a removal that came into effect on June 1, 2014.