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New trading rules will help level playing field, say brokers

New trading rules announced by Singapore Exchange and Monetary Authority of Singapore on Friday (Aug 1) will help to level the playing field for retail investors, say market participants. However, some experts also warn that the changes could hurt already-diminished trading volumes.

SINGAPORE: New trading rules announced by Singapore Exchange and Monetary Authority of Singapore on Friday (Aug 1) will help to level the playing field for retail investors. According to market participants, that is because the new measures will give smaller investors bigger play in blue chip counters. However, some experts also warn that the changes could hurt already-diminished trading volumes.

Investor confidence took a hit last October when three penny stock counters took a sharp plunge, wiping out more than S$8 billion in market value over just a few days.

Market participants said that new rules unveiled by the regulators last week are expected to raise investor confidence. These include reducing the board lot size to 100 shares from the current 1000, which will be implemented from January 2015.

Mr Loh Hoon Sun, Managing Director of Philip Securities, said: "Smaller investors would now be able to trade better quality, more expensive shares, rather than sticking to penny stocks. In general, these new regulations are good for the market. You must have a market which is seen to be transparent, a level playing field for all participants, and a financially strong market so that investors would have confidence in trading. These measures will help to achieve these objectives."

However, there are also concerns that trading volumes - which are already thin - could be squeezed even further. Under the new rules, securities intermediaries will be required to collect a minimum 5 per cent of collateral from investors trading in listed securities.

Market players said this added inconvenience for investors could hurt retail trading and put pressure on the industry. Recent statistics show that total market turnover volume year-to-date is down by about 40 per cent this year compared to the same period last year.

"For the collateral, it will spell more trouble needed for investors to place the deposits. Such rules would affect share trading volume and hurt remisiers, and I expect that the remisier base should drop further due to this," said Mr Jimmy Ho, President of the Society of Remisiers. 

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