SGX to cut bid size for shares, slashing trading costs

INVESTORS will soon find that minute-by-minute shareprice movements in many Singapore stocks will be smaller than before - and that could save them money.
The Singapore Exchange (SGX) is revamping the size of share-trading bid intervals in a move to slash the costs of trading.
In practice, by January next year, shares with a traded value of more than $10, for example, will move by units of two cents instead of 10 cents.
The revisions follow similar proposals that were unveiled in May.
Said SGX's senior executive vice-president and head of markets, Mr Gan Seow Ann: 'With a narrower bid-ask spread, market participants can expect greater efficiency in trade execution.
'The changes will enhance the overall competitiveness of our securities market.'
For shares priced between $1 and $9.99, SGX will cut bid intervals to just one cent - which now applies only to stocks traded between $1 and $2.99. That means the movement for stocks between $3 and $4.98 will go down from the current two cents, while that for stocks priced between $5 and $9.95 will fall from five cents currently.
For stocks above $10, SGX will slash the interval from a hefty 10 cents to two cents.
The interval for penny stocks - those below $1 - stays at half a cent.
The interval change means, for example, a CapitaLand share, which closed at $8.25 yesterday, would have moved up by only one cent to $8.26, instead of five cents to $8.30, if it had opened one bid higher today. In that instance, an investor would pay $40 less for every 1,000 CapitaLand shares he had bought.
And a DBS Group Holdings share, which closed at $20.10 yesterday, would rise by two cents to $20.12, not 10 cents to $20.20, if it jumps by one bid. An investor will save $80 buying one lot of 1,000 shares.
Another change involves 'forced' bids. Currently, a trader has to 'force' in his order if his price is more than six bids above or below the current price.
With the revision, SGX has now widened the threshold to 10 bids. This means that an investor can now type in an order within 10 bids of the last traded price without having to use the 'force' key to get his trade through.
Market experts offered a mixed response. Said CIMB-GK research head Song Seng Wun: 'It's good for traders as it offers more flexibility and a quicker turnaround. It'll create more opportunities, especially for program traders, and create a more efficient market.'
However, not everyone was as delighted. Said one dealer: 'The profit margins of day traders will suffer as it's now harder for the share price to move. For counters above $10, you'll need to move five steps to make the same amount of money. But it's generally good for the investor.''
Added regular Straits Times Forum Page writer Narayana Narayana, who was a broker for 40 years: 'For the man on the street, this doesn't make much difference because it's still half a cent for those stocks below $1.'

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