SINGAPORE (Sept 26): Singapore Exchange will introduce price bands during its securities auction routines to guard against “severe price dislocations” after Jardine Matheson Holdings’ shares plunged 83% earlier this year.
Price bands of 30%, 10% and 10% will apply to opening, midday and closing auction routines respectively, the exchange said in a statement.
The changes will apply to all components of the Straits Times and MSCI Singapore Indexes, among other securities, and follow a public consultation that ended on Aug 15.
The review, which also considered price-triggered time extensions and a hybrid model, comes on the heels of flash movements in the Singapore stock market this year.
In January, Jardine’s stock plummeted in pre-market trading, while United Overseas Bank saw a brief plunge of 6.6% in early trading in June.
“It will help avoid huge mistakes like what happened with Jardine Matheson,” said Joel Ng, analyst at KGI Securities (Singapore). The bands could work as a safety mechanism against once-in-a-while accidents such as fat-finger trades or algo-related mistakes, he added.
SGX said that market participants may need as much as 18 months to implement the new rules. In the interim, the bourse will monitor the market closely by potentially cancelling trades that are more than 30% away from the previous day’s closing price.
