Monday, October 24, 2016

The Demise Of Local Stockmarket for the sake of working without initiatives and nil judgement calls

Material Impact On Stocks Trading In SGX

I was in stockbroking from 1986 to 2004 and had seen my fair share of market gyrations. From the days of Pan-Electric to the 1987 Stockmarket Crisis, the Asian Financial Crisis 1997/98 through to the US Contagion 2007/08 and more. Although I have exited the stockbroking industry, I am proud and hold dear to my heart of 'Singapore as a Financial Centre'.

However, there are certain policy matters that were adopted but left unintended handicap and is decimating trading (volumes) in SGX. Perhaps, the Society of Remisiers (Singapore) - (SORS) - and/or the Securities Investors Association (Singapore) - (SIAS) -care to support or  disagree with the following views.

1) Micronising Bid/Ask quote -

Bid/Ask quote were reduced to $0.001 with a view to increase trading volumes and to act as 'fastfeeds' to algo-trades. It was well and fine until SGX mandated that main board companies must trade above $0.20 failing which the shares must be consolidated. What was the underlying principle for this?

Over time, it has been proven that if the ListCo is a 'dog', the price will still decline to below $0.20 after consolidation. Minority shareholders bear the brunt as their shares collapsed in value and trades were scarce post-consolidation.

2) Board Lot Size were reduced -

There was good intention when board lot size were reduced from 1,000 shares to 100 shares per lot. This is to make the higher value, more qualitative stocks available to the small investors. However, nothing was done to require a 'minimum dollar size' for each trade but there is a minimum brokerage fee charged. 

It is comical, for example, that a trade of 100 shares at $10.17 (SIA) is $1,017 and the brokerage charged is $25 - $40. Another trade of 100 shares at $0.001 (Annica) is $0.10 and the brokerage charged is also $25 - $40. Shouldn't there be a discrimination on minimum dollar value instead of a blanket application to all ListCos? 

3) Doing away with lunch breaks -

It was hopeful that more trades will be generated by ceasing lunch breaks for remisiers and dealers. But, over time, it has been proven that this is a myth. For the sake of health and good practice, lunch breaks should be restored. Remisiers and dealers need to meet clients and prospects to cultivate and generate interests and share investment ideas. 

If machines alone can proliferate trades, 90% of trades would have been executed through the internet but it is the reverse that is true.
This is not a fault finding note but I am hopeful that the unintended ills are redressed. I trust the relevant authorities will expeditiously rectify the kink.

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