Singapore Exchange to change fee structure to raise liquidity

SINGAPORE, April 10 Thu Apr 10, 2014 4:43am EDT

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SINGAPORE, April 10 (Reuters) - Singapore Exchange Ltd (SGX) in June plans to introduce a new fee structure for trading securities to increase liquidity and encourage retail investors to trade higher-priced stocks.

Singapore is a major financial centre but the local equity market has struggled in the past six months with falling trading volumes amid a dearth of major new listings. Its most actively traded shares are often "penny stocks".

The bourse's predicament was brought to the fore when three stocks crashed in October, losing around S$8 billion ($6.41 billion) over two days after large run-ups in their share prices.

SGX and the central bank responded by proposing measures such as raising the minimum share price and requiring traders to disclose short-selling, or share borrowing.

In one of the first initiatives to be implemented, SGX from June 1 will lower the cost of clearing trades in a stock or other listed security to 0.0325 percent of the value from 0.04 percent.

"We want to move retail investors up the chain towards higher value," SGX President Muthukrishnan Ramaswami said at a briefing on Wednesday.

Another change, however, could make trading more expensive for institutional investors. The exchange has removed a S$600 cap on total clearing fees, meaning institutional investors placing trades above S$1.85 million will face higher charges.

SGX is also trying to curtail off-exchange activity by raising the cost of trades settled "off market" to 1.5 percent of their value, from the current situation where they pay the same S$30 fee charged for "on market" trades.

By the time the new fee structure is in place, the exchange hopes to have several banks and trading houses signed up to a new incentive scheme to be "market makers". That will give them rebates on clearing fees, with higher rebates for trades on more illiquid stocks.

"We are so far behind as a market place that this is the next place we have to go," said Ramaswami.

($1 = 1.2481 Singapore Dollars) (Reporting by Rachel Armstrong; Editing by Christopher Cushing)

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