Apr 11, 2014

    SGX to lower clearing fee to improve liquidity

    THE fees that share investors have to pay to have a trade cleared will be cut from June 1, the Singapore Exchange (SGX) said yesterday.

    The clearing fee will fall from 0.04 per cent to 0.0325 per cent of the contract value, in a change likely to impact large - institutional - investors far more than small ones.

    A trade of $1 million, for example, will attract a clearing fee of $325 from June, a saving of $75 from the $400 now.

    However, the cap of $600 - which effectively kicks in for contracts of $1.5 million or more - for any single trade clearance has been removed.

    This means that investors with super-large trades could actually pay more. For example, a trade of $2 million will attract a fee of $650 from June.

    Retail investors benefit in a very small way: An investment of $10,000 will save them just 75 cents from June 1.

    "Our initiatives are targeted at improving liquidity in our market and ensuring the safe and orderly conduct of trading activity," said SGX president Muthukrishnan Ramaswami.

    The exchange flagged such a move in February, saying it will kick in on May 2, but the implementation was announced yesterday with a later start date so that industry participants can be better prepared.

    The overall hope is that trading activity will pick up. Securities turnover has, in general, been soft over the past few years. Last October's penny stock crash involving Blumont Group, Asiasons Capital and LionGold Corp damaged investor confidence further.

    "A 20 per cent cut in the clearing fee is most welcome," said Mr David Gerald, president and chief executive of the Securities Investors Association (Singapore), the main retail investor lobby group.

    "It will help increase the liquidity somewhat, it's a good move."

    However, Mr Gerald said the change will help traders more than long-term investors.

    Traders refer to people who buy and sell shares within a quick period hoping to make a profit - so any change in fees will impact them more as they execute more trades.

    Investors tend to hold shares for a longer period, so the impact will be less.

    Most fees remain unchanged, so the impact on smaller investors will be minimal. Another fee - the trading fee - will stay at 0.0075 per cent.

    The brokerage fees remain the largest cost, at 0.18 per cent to 0.28 per cent of the contract value for mobile and online trades, with a minimum of $25.

    The cost is higher for broker-assisted trades, at 0.225 per cent to 0.5 per cent, and investors need to pay at least $40.