Anita Gabriel, TheBusiness TimesTuesday, Aug 26, 2014
MARK this date – Jan 19, 2015. That’s when retail investors will be able to start buying securities listed on the Singapore Exchange (SGX) in smaller lots of 100 units from 1,000 units currently.
In a statement on Monday, SGX said the reduction in standard board lot size of securities listed on the exchange from 1,000 to 100 units will make it more affordable for retail investors to invest in a wider range of equities.
“The reduced board lot size will benefit all investors and make it easier to invest in blue chips and index component stocks which tend to be higher-priced. It will also allow institutional investors to better manage their risk exposures through finer asset allocation of funds,” said SGX chief executive Magnus Bocker.
SGX’s move to cut lot sizes is also generally viewed as a safeguard measure in the wake of last October’s penny stock crash. By making blue chip stocks more attainable to retail investors, it is hoped that they will invest more in these safer counters than load their portfolios with relatively more risky, lowly-priced shares.
As a result of the change, a minimum subscription and allocation value – S$500 for mainboard counters and S$200 for Catalist counters – will be imposed on investors applying for shares offered during the initial public offering (IPO).
“This is to address the possibility of disproportionately high trading costs that may be incurred by IPO applicants who are allotted the minimum number of shares (one board lot of 100 shares) at the minimum issue price for IPO shares,” said SGX.
For example, if a company is offering its shares at 50 Singapore cents a share, then the minimum an investor can subscribe for is 1,000 shares (S$500). If the share is being offered at S$10 a piece, then the minimum subscription allowed is for 100 units (S$1,000).
With this change, SGX said that companies now have discretion to set their own minimum subscription quantity, which must be in multiples of 100 shares.
This means that the minimum subscription quantity of shares may differ from one IPO to another, depending on the issue price for the IPO shares.
The new board lot size will apply to ordinary shares, including shares traded on GlobalQuote, real estate investment trusts, business trusts, company warrants, structured warrants and extended settlement contracts. Existing counters with board lot sizes of 100 or less units will remain unchanged.
The board lot sizes for exchange traded funds – except for SPDR Straits Times Index (STI) ETF and ABF Singapore Index Bond Fund for which the board lot size will be reduced to 100 units – American Depositary Receipts and fixed income instruments, including retail bonds, Singapore Government Securities and preference shares will remain unchanged.
Beginning in September, SGX will introduce a separate column – “BLot” – on the SGX website’s price page to indicate the board lot size of each counter. With that, the board lot size will be removed from the counter names as practised now with the exception of sister counters and temporary odd lot rights counters. (Counters which do not have the standard board lot size of 1,000 units are currently indicated with the board lot size as part of the counter name, for example, Creative50.) In January next year, the “BLot” column will clearly indicate which securities have a board lot of 100 units.
SGX said investors can continue to trade in odd lots in the Unit Share Market.
However, once the board lot is reduced, the maximum quantity of units that can be traded in the Unit Share Market will be cut from 999 to 99 effective Jan 19, 2015.
Naturally, it’s a move hailed by the chief of an investors grouping here.
“This is a much-anticipated move that will be welcomed by our citizens,” said David Gerald, president and CEO of Securities Investors Association (Singapore).
“Now that blue chip stocks are more accessible, I would encourage retail investors to seriously consider share investing as a way to diversify their portfolio and grow their savings for retirement,” he added.