SGX circuit breakers kick in on Feb 24
THE Singapore Exchange, South-east Asia's biggest bourse, will add circuit breakers next month that protect investors from excessive stock swings, after a plunge in three commodity companies erased $6.9 billion in market value.
The trading restrictions will apply to the Straits Times Index and MSCI Singapore Index members, as well as all securities priced from 50 cents, from Feb 24, according to a regulatory filing from the bourse.
The circuit breakers will be triggered when a stock rises or falls more than 10 per cent from at least five minutes earlier, leading to a five-minute period where trading is limited, according to the statement. The rules will cover securities that account for about 80 per cent of trading on the Singapore market.
The exchange operator said in October that it would implement automatic price controls after declines in commodity companies Blumont Group, Asiasons Capital and LionGold Corp spurred an investigation by the Monetary Authority of Singapore.
All three companies have said they don't know what precipitated the plunge.
Hong Kong Exchanges & Clearing is studying whether its market needs circuit breakers to prevent trading errors from causing large declines or surges in prices, a person familiar with the matter said this month.
SGX president Muthukrishnan Ramaswami said in the statement: "The introduction of circuit breakers and the new error-trade policy will assure investors of continued safety and transparency even under volatile market conditions."
If the circuit breaker is triggered, investors can only trade within 10 per cent of the reference price from at least five minutes earlier, according to the statement. Normal trading resumes five minutes later.
The bourse operator will also revise its erroneous-trade policy, it said. Purchases will not be cancelled if the price falls within a range of 5 per cent or 20 minimum bid sizes from the last traded price for most securities. The price range for structured warrants will be 25 per cent or 20 minimum bid sizes from the last valid price, SGX said.
Trades done outside the relevant price range are eligible for review by SGX, the bourse operator said in the statement.
The exchange said yesterday its second-quarter profit fell 1.8 per cent as a decline in equity trading volumes overshadowed an increase in derivative transactions.
Profit dropped to $75 million in the three months ended Dec 31, compared with $76.3 million a year earlier.