Tuesday, August 20, 2013

SGX seeks to reduce standard board lot size to 100 units

The Singapore Exchange (SGX) is seeking to reduce the standard board lot size of securities listed on the exchange from 1,000 to 100 units.

SGX said it aims to introduce the smaller board lot size by the first quarter of next year, and eventually to one unit in about two years' time.

See source: http://www.channelnewsasia.com/news/business/sgx-seeks-to-reduce/782336.html

My thoughts:
Why a multi phase change?
If they want to reduce to a 1 unit per lot system, it should be a one time change. Why should it be done in phases? Brokerage firms will need to make changes to their system to cater to this change each time the lot size changes like this. 

Greater convenience
With a 1 unit per lot system, it makes it more convenient for investors to buy in "odd units", especially for counters that are above $10. Even though POEMS currently has a platform to trade odd units, the volume is typically low which resulted in a wider price buy and sell range.

Possibility of minimum commission changes
With such a change, brokerage firms may also relook at the need of reduction of the minimum commission charges. Otherwise, it is pointless to have a lot size of 100 or even 1 when most brokerages charge a commission of $25 for each transaction. If this does not happen, more investors will switch to using standard charted brokerage accounts which has no minimum brokerage charges.

Changes in SGX rulings
I will also expect some changes to the SGX rulings. There are some rules that are directly related to the concept of lot size. These rules needs to be amended as well.

These changes will bring about many changes to the way we invest or trade. For good, for bad? Only time will tell.

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