Singapore Exchange plans to remove Minimum Trading Price rule

Maria Nikolova

SGX RegCo will not add companies to the MTP watch-list until and unless it is determined that the MTP framework should be retained in its current form.

Singapore Exchange Regulation (SGX RegCo), a subsidiary of Singapore Exchange (SGX), today announced its intentions to scrap the Minimum Trading Price (MTP) rule. This plan is unveiled as SGX RegCo has enhanced the tools used to deal with manipulation risk in the stock market by restricting accounts involved in unusual activities in a stock and concurrently issuing a Trade with Caution alert on the same stock.

This is in addition to other tools to address manipulation risk such as the joint publication in August 2019 with the Monetary Authority of Singapore (MAS) of a MAS-SGX Trade Surveillance Practice Guide setting out principles on developing and implementing robust trade surveillance operations to enable Members to curb misconduct as early as possible.

SGX RegCo also notes its discretion to disregard artificial distortions to share prices if it suspects the share price has been manipulated so as to enable the company to circumvent certain share price or market capitalisation thresholds in the Listing Rules.

With the implementation of these measures, the number of manipulation alerts has declined. SGX RegCo has meanwhile received requests to review the MTP rule, which had been consulted on in 2014 and put in place thereafter, also to address manipulation risk. Following the review, SGX RegCo is proposing that the MTP rule be removed.

The MTP framework was proposed in 2014 for companies whose share prices were below S$0.20. In 2016, the MTP requirement was refined so as to state that a company will be on the MTP watch-list if its share price is below S$0.20 and its market capitalisation is below S$40 million. Companies have three years to exit the watch-list, failing which a company may be delisted.

On top of that, improvements will be made to the financial watch-list which serves to alert investors about financially weak companies. To prevent circumvention of existing requirements which a company must satisfy to exit the watch-list, SGX RegCo will take into consideration whether profits the issuer recorded were due to non-recurrent income or items generated by activities outside of the ordinary course of business, and whether its auditor has issued an adverse or disclaimed audit opinion, or a material uncertainty relating to going concern on the company’s accounts.

The public consultation is open till December 27, 2019. In the meantime, SGX RegCo will not add companies to the MTP watchlist until and unless it is determined that the MTP framework should be preserved in its current form. Companies currently on the MTP watchlist may continue to exit under the existing criteria at the half-yearly reviews.

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