(Adds comment, more detail)
* Proposes minimum share price
* Independent listing and disciplinary committees
* Follows penny stock scandal
By Rachel Armstrong
SINGAPORE, Feb 7 Singapore has proposed a major
shake up of its stock market rules following a penny stock
scandal which hit trading volumes on Southeast Asia's largest
bourse that has recently struggled to attract big share listings
like its rival in Hong Kong.
The Monetary Authority of Singapore (MAS) and Singapore
Exchange Ltd (SGX) said on Friday they are consulting
the market on a series of changes including minimum trading
prices, new collateral rules, short-selling reporting, and the
establishment of independent committees to vet listing
applicants and impose regulatory sanctions.
The Singapore Exchange is the sole operator of the city
state's stock market but has found it difficult to increase
trading volumes in the past few years and trails Hong Kong in
league tables for big ticket new issues.
In January, its average daily value of securities traded was
S$1.07 billion, down 41 pct from the same level a year ago
The thin trading volumes have encouraged activity in "ultra
penny stocks", which trade for as little at S$0.001 and have
become some of the most actively traded shares.
Problems surfaced in the market in October when shares in
three companies - Blumont Group Ltd, LionGold Corp
and Asiasons Ltd - crashed and wiped out
about S$8 billion ($6.31 billion) in value in just two days
after huge run-ups in their share prices.
Lee Chuan Teck, assistant managing director for capital
markets at MAS said: "This consultation allows us to have a
conversation with all stakeholders on how to make the market
strong and more mature."
The proposals include details on a minimum share trading
price, with regulators looking at a minimum range of around
S$0.10 and S$0.20.
If that were introduced around 130 to 230 companies listed
on SGX would struggle to meet it, but regulators said most would
be able to comply through "share consolidation" that could take
place during a transition period of at least a year.
Companies that still did not meet the requirement would have
to be delisted, although shareholders would still be able to
exit their positions at an alternative trading facility.
"Low-price securities are generally associated with high
volatility, which in turn makes them more susceptible to
speculation and potential market manipulation," MAS and SGX
said. "Introducing a minimum trading price as a continuing
listing requirement will help to address these risks."
The Securities Investors Association of Singapore said the
proposals would create a more orderly and transparent market.
The penny stock scandal has also highlighted the practice of
"contra trading", a system only used in Singapore and Malaysia
where investors can trade shares without posting any collateral,
blamed for creating excessive speculation.
The regulators are proposing bringing in collateral
requirements of at least 5 percent of a customers' open position
and reducing the settlement period to two days.
The SIAS said in a statement this would help to discourage a
"gambling mentality and encourage an investing mindset."
Independent committees to vet listing applicants and to hear
formal charges brought by SGX against issuers that have breached
listing rules are also being considered.
These aim to deal with any conflicts of interest. SGX is the
front-line regulator of the city-state's stock market as well as
its commercial operator.
"I think in the short term this will probably have some
negative effect on trading volumes as there are some retail
traders there just to take a speculative position, but MAS and
SGX's position is they want less of that and a sounder market
structure," Kenneth Ng, of brokerage CIMB Securities, said.
($1 = 1.2675 Singapore dollars)
(Reporting by Rachel Armstrong; Editing by Matt Driskill and