Ditching minimum trading price fixes one flaw, but long tail still a problem

THE experiment by the Singapore Exchange (SGX) in enforcing a minimum trading price (MTP) could be coming to an end after three years, with little to show for all the trouble.

Doing away with the rule will remove a crude and flawed quality-control tool from the mainboard, but the risks and structural problems that led to the MTP in the first place are not going anywhere. SGX must continue to strengthen its gatekeeping.

The Business Times has reported that SGX Regulation (RegCo) is planning a public consultation on doing away with the MTP rule, which currently requires mainboard-listed companies to maintain a share price of at least 20 Singapore cents and a market value of at least S$40 million. If the rule is removed, it will mark a U-turn for the exchange, which pushed through the controversial regulation in 2016 - in the wake of the 2013 penny stock crash - as it sought to reduce the vulnerability of mainboard-listed stocks to market manipulation.