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Singapore bourse to tighten bid spreads to boost liquidity

06-01-2011 16:22 BJT

SINGAPORE, June 1 (Xinhua) -- Singapore Exchange has announced that it will tighten bid-ask spreads by as much as 80 percent starting from July 4, in a bid to boost liquidity, local media reported Wednesday.

For shares priced below 20 cents apiece, the minimum bid spread has been cut to 0.1 cent, compared to half a cent now. Shared priced between 20 cents and 99.5 cents will trade at half-a-cent steps, while those trading within the 1-1.99 Singapore dollar price range will have the bid size narrowing to half a cent from one cent.

It kept the bid size of one cent for shares priced between 2 and 9.99 Singapore dollars, but narrowed the bid size from two cents to one cent for stocks price 10 Singapore dollars and above, the Business Times reported.

The bourse said this would create annual savings of about 1.7 billion Singapore dollars for investors in the Singapore market.

But the Business Times said the reactions were mixed on whether it would boost liquidity.

"While the tighter spreads would encourage quicker matching of orders, contra traders may find it more difficult and challenging to make trading profits. As such, this trade-off may or may not lead to enhanced liquidity," said Albert Fong, president of the Society of Remisiers Singapore.

Another broker also noted traders who thrived on 20-cent stocks may now avoid them since there are more levels to clear.

Others said the narrowing in bid-ask spreads is the right step to boost liquidity.

"Tighter spreads will encourage investors to increase their participation in SGX, the best market for assessing fast-growing Asia. This will, in turn, enhance liquidity here in Singapore," said Chew Sutat, head of securities at SGX.

By comparison, bid sizes in Hong Kong are tiered according to 11 price ranges, beginning with 0.1 Hong Kong cent for shares prices up to 25 cents, to 5 Hong Kong dollars for those priced over 5,000 HK dollars and under 10,000 HK dollars. (1 U.S. dollar = 1.23 Singapore dollars; 1 U.S. dollar = 7.8 HK dollars)

Editor:Yang Jie |Source: Xinhua

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