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Screenshot of a breaking news alert e-mail from Q2 2017
Singapore Exchange (SGX) is changing the methodology used to determine whether a company share price meets the minimum trading price (MTP) requirement, following market feedback. The change comes after SGX’s extension last month to September 1st 2016 the date of the review of the volume weighted average price (VWAP) of shares of companies which consolidate their shares before March 1st 2016.
In addition, SGX is granting the same extension to September 1st, 2016 for companies which have experienced – for the first time – a dip in their VWAP below S$0.20 due to the extreme market volatility in January 2016. SGX will be contacting these companies. The extension will allow these companies – which number about 20 as at end-January 2016 – time to evaluate their options and take action to comply with the MTP requirement.
SGX will make the change in the way the 6-month VWAP of shares is calculated effective immediately, aligning the methodology with that of international data companies. The 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.
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 86, 74 have decided on a share consolidation of which 57 have completed this corporate action.
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.
“We have listened to feedback from the public and are adjusting the VWAP calculation methodology. 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.
For the official release click here.