Singapore Regulators Tighten Rules After Penny-Stock Rout.

http://www.bloomberg.com/news/2014-08-01/singapore-regulators-tighten-rules-after-penny-stock-rout.html

Singapore will introduce a minimum price for mainboard shares and reduce the lot size for transactions after a slump in the stocks of three commodity companies erased $6.9 billion in market value over three days in October.

The city-state will impose a minimum trading price of S$0.20 to address risks of low-priced securities being more susceptible to excessive speculation and potential market manipulation, according to a joint statement by the Monetary Authority of Singapore and Singapore Exchange Ltd. (SGX)yesterday. Other new measures include collection of a 5 percent collateral and reporting of short positions.

The regulators have been reviewing Singapore’s stock market structure since Blumont Group Ltd. (BLUM), Asiasons Capital Ltd. (ACAP) and LionGold Corp. tumbled at least 87 percent over three days in October. SGX, Southeast Asia’s biggest bourse, added circuit breakers in February to protect investors from excessive price swings.

The measures are aimed “to help restore confidence in the market,” Gabriel Yap, a former broker who now manages his own investment advisory co., GCP Global Pte, said yesterday. “These won’t prevent such fiascos from happening again. What authorities should do is ban trading of stocks that have been manipulated.”

Regulators worldwide have evaluated safeguards since the May 2010 plunge known as the “flash crash” erased more than $800 billion from the value of U.S. equities in minutes. Exchanges in that country have implemented a limit-up/limit-down initiative that prevents market makers from quoting shares at prices deemed too far above or below current levels.

The new steps will be implemented in phases over the next two years. To boost trading volumes, Singapore will reduce the lot size of listed securities in January to 100 shares from 1,000 shares currently, MAS and the exchange said in the statement.

Singapore Exchange said July 31 fourth-quarter profit fell 12 percent to S$77.4 million ($62 million) from a year earlier as share trading volumes shrank following the penny-stock rout.