Singapore Exchange (SGX) has proposed the reduction of tick sizes in certain price bands of the securities it trades in a bid to boost liquidity and compete more effectively with other Asian exchanges.
The deadline for the submission of public comments on SGX’s proposals is 21 September.
The exchange has proposed cutting the tick sizes of securities trading below S$0.20 to S$0.001 from S$0.005, those trading between S$1.00 and S$1.99 to S$0.005 from S$0.01, and those trading at S$10 and above to S$0.01 from S$0.02.
SGX’s definition of securities includes stocks, preference shares, real-estate investment trusts, business trusts, warrants and any class of securities or futures contracts not specified under SGX-ST Rule 8.3.3. It excludes exchange-traded funds (ETFs), bonds, debentures and loan stocks.
According to SGX, the reduced tick sizes will allow investors to quote at more optimal levels, resulting in tighter bid-ask spreads and thus lowering the cost of trading. The exchange adds that the change will align its tick sizes with those of other major Asian exchanges, enhancing its competitiveness.
SGX has also proposed amending the tick sizes for debentures to allow it to implement a minimum tick size of S$0.01 for higher-priced instruments and S$0.001 for lower-priced ones. The minimum tick size for all debentures is currently S$0.001. This change would bring debenture tick sizes on the exchange in line with those applied to ETFs.
To complement the tick-size changes, SGX has also proposed a widening of the ‘forced order range’ to +/- 20 ticks from +/-10 ticks for securities and to +/- 300 ticks from +/- 30 ticks for ETFs and debentures. The forced order range is a pre-execution mechanism that prevents investors from submitting erroneous trades by entering the incorrect price. Any orders outside the range must be confirmed before they can be submitted.