SGX trading costs drop but so does liquidity
The past year has seen trading costs at the
Singapore Exchange (SGX) fall for all stocks, while average daily
number of trades and quotes have increased for the overall market.
SGX said a reduction in trading costs for
large and mid-cap stocks after June 2011 was likely a result of market
liquidity enhancing initiatives such as the changes to minimum bid sizes in
June 2012 saw a further sharp decline in
price impact cost across all size categories, despite lower volumes. The
Singapore bourse also highlighted a decline in value/volume ratios from August
2011 to April 2012, which it believed was a result of greater trading in penny
The good news for Asia’s trading community
was dampened by a steep decline in traded value. Daily traded value halved in
the last two quarters of 2011 from over US$1.9 billion in August 2011 to US$800
billion in December 2011.
Liquidity for large-cap stocks was thin
from August to December 2011 and after a temporary improvement during at the
beginning of 2012, depth levels once more declined.
The average quote/execution ratio decreased
by 32% from a peak of 3.4 between July and August 2011, and remained stable at
1.9 for the rest of the year, meaning for every 190 quotes, 100 result in
trades, compared to 340 quotes previously.
Trading activity changed significantly in
the months following July/August 2011, when minimum tick sizes were reduced for
securities and SGX’s new Reach trading engine was implemented.
Average daily total trades from August 2011
to June 2012 were generally sustained at levels twice the average number of
trades transacted in the first-half of 2011. There was also a permanent
reduction of approximately S$20,000 in average trade size during this period.