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SGX to drop minimum trading price rule from June 1, but tightens financial watch-list criteria
THE Singapore Exchange will soon do away with its minimum trading price rule for mainboard-listed companies, after finding “broad support from market participants” in last year’s public consultation, its regulatory arm said on Monday.
Since 2016, companies on the mainboard must have a six-month volume-weighted average share price of at least S$0.20 and average daily market value of at least S$40 million.
But, citing a slew of more recent measures to tackle the risk of market manipulation, the bourse operator will now scrap the minimum trading price requirement on June 1.
From the same day, though, it is also tightening the exit criteria for its financial watch-list - which puts on notice companies that have not maintained the six-month average daily market value and have also posted pre-tax losses for their last three financial years.
Non-recurrent income or income from activities outside the ordinary course of business will no longer count towards the profitability requirement to get off the financial watch-list, Singapore Exchange Regulation (SGX RegCo) has announced.
Companies that have a modified audit opinion looming over the latest financial statements, or whose auditors flagged going concern-related material uncertainties, also cannot leave the list.
This is even though SGX RegCo said last month that it would not put firms on the financial watch-list this year, as the Covid-19 pandemic roiled business and economic conditions.
Still, companies now on the minimum trading price watch-list need not meet any exit criteria and apply for removal, as it will be shut down when the new framework takes effect.
Compared with other weapons in its arsenal, such as “trade with caution” alerts, SGX RegCo said that the minimum trading price framework “has turned out to be a blunt tool in addressing risk of manipulation” in the stock market.
Watch-listed companies ran the risk of being delisted, and even faced challenges borrowing from banks or developing business relationships - even though the share prices of most of these counters were not found to have been manipulated, as SGX RegCo acknowledged.
“SGX RegCo will also ignore artificial distortions to share prices that are not representative of true market demand in assessing share price or market capitalisation thresholds in the Mainboard and Catalist listing rules, including the market capitalisation test for exiting the financial watch-list,” the regulator added in its statement.
It said that it is looking into improved tools to prevent and detect market manipulation, such as using artificial intelligence in its real-time monitoring system.