At long last, SGX tweaks contested minimum trading price rule

Compliance deadlines have also been extended.

Singapore Exchange revealed that it is changing the methodology used to determine whether a company share price meets the hotly-debated minimum trading price (MTP) requirement, following market feedback.

The volume weighted average price (VWAP) of shares following a share consolidation will now be computed based on historical prices adjusted for the consolidation ratio. Previously, the VWAP was computed based on the total value of securities traded for the 6 months under review divided by the total volume traded for the 6 months.

“The VWAP of the shares of companies will now reflect fully the impact of a completed share consolidation. This will reduce the risk of companies having to consolidate shares at extremely high ratios, or for repeated corporate actions. We are also giving companies which might have been unduly impacted by the market volatility in January, time to react,” said June Sim, Head of Listing Compliance at SGX.

As at the end of January 2016, 86 of the 181 companies likely to be affected by MTP have either acted, or announced plans, to comply. Of these 74 have decided on a share consolidation of which 57 have completed this corporate action.

The exchange also sought to mitigate the effect of extreme market volatility in the first month of the year. Companies whose VWAP dipped below the required $0.20 for the first time in January will be granted an extension to 1 September 2016 to comply with the MTP.

The extension will allow these companies – which number about 20 as at the end of January – time to evaluate their options and take action to comply with the MTP requirement.

This comes after the SGX last month extended the date of the VWAP review of shares of companies which consolidate their shares before 1 March 2016.

SGX introduced an MTP for shares of Mainboard companies in March 2015 to reduce the risk of excessive speculation following the extreme volatility of low-capitalisation stocks in October 2013. The requirement takes effect from 1 March 2016 after a 1-year transition period.