The Singapore Exchange Limited (SGX) has proposed to reduce the standard board lot size of securities listed on the SGX from 1,000 units to 100 units, with a view to reducing it to 1 unit in the longer term. The SGX has indicated that the reduction of the board lot size to 100 units as a first step will allow it to assess the market impact before unitizing the standard board lot.
Proposal
The proposed standardised standard board lot size of 100 units is intended to apply to company shares (excluding preference shares) with a board lot size of more than 100 units, real estate investment trusts (REITs), business trusts, company warrants, structured warrants, extended settlement contracts and shares on Globalquote. It is not intended to apply to existing shares that are currently trading in board lots of under 100 units, exchange traded funds, American depository receipts and fixed income instruments (such as Singapore Government Securities, bonds and preference shares). Following the proposed reduction of the board lot size to 100, SGX has indicated that it intends to retain the unit share market to cater for trades of sizes smaller than the new board lot size of 100.
Alignment with Global Practices
The SGX has also noted that other developed exchanges have a unit share market or a board lot size of 100 units, including the New York Stock Exchange, Deutsche Börse, London Stock Exchange and the Australian Securities Exchange, whilst other exchanges such as the Tokyo Stock Exchange and the Hong Kong Exchange allow issuers to determine their board lot sizes which can start from one unit. SGX’s proposal to reduce the standard board lot size will therefore be a move towards closer alignment with global practices adopted by other developed markets.
Key Benefits
The SGX has indicated in its consultation paper that it expects the proposed reduction in the standard board lot size to offer greater accessibility to equity investments to the general population (such as increasing the affordability of blue chips), enhance risk management for investors, and improve market liquidity and price discovery, thereby serving to position Singapore as a prime capital market and listing venue of choice and help reduce costs of capital for issuers.
Proposed Amendments to Listing Rules
The SGX is also proposing amendments to the listing rules to provide for: (i) the removal of Mainboard listing rules specifying the minimum board lot size for structured warrants, given the adoption of the proposed standard board lot size of 100; and (ii) the amendments to the Mainboard and Catalist listing rules to require issuers to specify in their annual reports, the number of shareholders who hold less than 100 shares each.
The SGX has also indicated that it intends to retain the existing requirements on the minimum initial shareholding spread requirements and distribution guidelines at listing and the minimum float requirements post-listing, as these should continue to serve as preventive measures against concentration of shares, disorderly trading and market manipulation. Next Steps Subject to regulatory approval and member readiness, the SGX has indicated that it is targeting to introduce the proposed reduction in the standard board lot size by the first quarter of 2014.
Next Steps
Subject to regulatory approval and member readiness, the SGX has indicated that it is targeting to introduce the proposed reduction in the standard board lot size by the first quarter of 2014.
