OREANDA-NEWS. Singapore Exchange (SGX) is proposing to make the entry criteria for the minimum trading price (MTP) watch-list more targeted with the addition of a market capitalisation test.

SGX has reviewed the current MTP criteria to assess if the objective of reducing the risk of excessive speculation and potential manipulation can be achieved in a more calibrated and effective way. Market feedback provided by stakeholders was also taken into account in the review. 

SGX noted from the review that among companies with a 6-month volume-weighted average price (VWAP) of shares of less than S$0.20, those with market capitalisation of  S$40 million or more showed better liquidity characteristics and lower volatility compared with companies with market capitalisation of less than S$40 million.

This thus suggests that the market capitalisation test as an MTP entry criterion will complement the existing requirement to more precisely achieve the goal of reducing excessive speculation and potential manipulation.

The consultation therefore proposes that a company is placed on the MTP watch-list if:

1. The 6-month VWAP of its shares is below S$0.20 and

2. Its 6-month average daily market capitalisation is below S$40 million

The SGX watch-list currently has two entry criteria: the MTP and the financial entry criteria. SGX is proposing to review companies every half-year instead of every quarter, for placement on the MTP and financial entry criteria watch-lists. This will align the review period with the 6-month look-back interval used to calculate VWAP. No other change to the financial entry criteria is proposed in today’s consultation.

SGX will not place new issuers onto the MTP watch-list until the exchange has considered feedback to the consultation and finalised any change. Companies which entered the MTP watch-list at the 1 March 2016 review will remain on it pending any refinement to the requirement. Existing MTP issuers may continue to exit the watch-list if their 6-month VWAP is at least S$0.20.