OREANDA-NEWS. Singapore Press Holdings (SPH), Singapore Exchange (SGX) and FTSE Russell announced today tighter liquidity rules governing the selection of index constituents of the Straits Times Index (STI). STI components will be required to have a higher percentage of their issued shares traded in a given period.

The STI is the Singapore stock market’s main benchmark and is widely used worldwide by market participants as the basis of tracker funds, ETFs, structured products and derivatives. To ensure that the index remains the best solution for market participants, FTSE Russell, SGX and SPH undertook a market consultation to examine options to improve liquidity in the index. A broad range of market participants were consulted from across the investment community, including asset owners and their consultants, asset managers and structured product providers. There was widespread support for a higher liquidity requirement for index stocks.  

Following the consultations, the index partners decided to make the following change:

  • Current Rule: The current liquidity rule for the STI tests each security’s liquidity semi-annually in March and September by calculating its median daily trading per month. To be eligible for inclusion, securities must turnover at least 0.05% of their shares in issue (after the application of any investability weightings) based on their median daily trade per month in 10 of the 12 months prior to the March or September review. For existing STI constituents, securities must trade at least 0.04% of its shares in issue in 8 of the 12 months.
  • New Rule: Under the new rule, securities must turnover at least 0.10% of their shares in issue (after the application of any investability weightings) based on their median daily trade per month in 10 of the 12 months prior to the March or September review. For existing constituents, securities must trade at least 0.08% of its shares in issue in 8 of the 12 months.

The tighter liquidity requirement will not be applied to the other indices in the FTSE ST Index Series. To date, the STI has represented the Large Cap segment of the FTSE ST All-Share Index. The STI will continue to be the single, primary large-cap or blue-chip market benchmark, but the Large Cap portion of the FTSE ST All-Share will be combined with the Mid Cap index to create a new FTSE ST Large & Mid Cap Index.

The new STI liquidity rule and FTSE ST Index Series segmental change will be implemented following the September review, and the new component stocks will be applied after the close of markets on the 3rd Friday in September (18 September 2015).