MORE CAN BE DONE
In short, the true challenge is to lift overall secondary trading liquidity in SMEs on the SGX, and more can be done.
One possibility is to remove SGX clearing and trading fees to reduce friction costs for proprietary traders and market makers. Encouraging and attracting proprietary trading and market making to the SMEs can help improve the bid–ask spreads – the difference between the highest price a buyer is ready to pay and the lowest price a seller is willing to accept – and improve liquidity and trading activity.
Another could be to encourage SGX member brokerage firms to hire in-house proprietary traders who trade using a firm’s own capital, rather than client funds, and can provide trading liquidity to the market, as was the case during the heydays of the market prior to the 2013 penny stock crash. To be sure, some level of regulatory policing might be needed to prevent the creation of a false market.
Lastly, reporting templates in SGX announcements could be created for half and full-year results where companies can provide more explicit and detailed forward earnings guidance and outlook. These fields in the template can be made compulsory.
Delisting may make sense. But before making this the default way out, other options should be looked at. Investors deserve that much, at the very least.
Ven Sreenivasan is a former editor and journalist who has covered financial markets, economic and corporate news and aviation for more than 30 years.
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