MTP is good for our markets

THE Small and Middle Capitalisation Companies Association (SMCCA) is wrong in believing that the introduction of the minimum trading price (MTP) will "add no meaningful value to the capital markets, but instead reduce liquidity and add to listing costs" (BT, Oct 16).

It says that the 20-cent MTP will "have a negative impact on market liquidity in addition to other unintended consequences". Whether the MTP is 20 cents or 10 cents (as proposed by some quarters) or even 50 cents or S$1, the free float in percentage terms still stays the same, after these affected companies have consolidated their shares to fulfil the MTP.

The absolute quantity of shares traded may seem to be lower, but the dollar value of their shares traded will remain the same, assuming the same level of trading activity. For example, a one-cent share traded in volumes of 200,000 will now be traded at 20 cents in volumes of 10,000. Traded value is a better measure of liquidity.