SINGAPORE (May 11): The minimum trading price (MTP) rule, which has been a thorn in the flesh for many companies, will be removed effective June 1, according to the Singapore Exchange Regulation (SGX RegCo).
As a result, the MTP watch-list will be removed on the same date.
Mainboard-listed companies – currently on the MTP watch-list – will also no longer be required to satisfy the exit criteria and apply for removal from the list.
These changes come following the “broad support” received from market participants in response to a public consultation issued by the stock market regulator.
SGX RegCo concedes that the MTP rule has turned out to be a “blunt tool” in addressing the risk of stock manipulation.
Moreover, the shares of most of the companies on the MTP watch-list have not been found to be manipulated, it adds.
Instead, these companies have been subject to the risk of a delisting as a result of the MTP rule and have faced challenges in borrowing from banks and developing business relationships, says SGX RegCo.
In place of the MTP rule, SGX RegCo says several anti-manipulation tools, such as the enhanced “Trade with Caution” alerts and Member Surveillance Dashboard, have been implemented.
At the same time, the stock market regulator has refined the exit requirements of the financial watch-list.
Starting from 1 June 2020, non-recurrent income or income generated by activities outside the ordinary course of business will be excluded in assessing whether companies fulfill the profitability test for exiting the financial watch-list.
In addition, a company will not be considered as meeting the profitability test for exiting the financial watch-list if its latest financial statements are subject to a modified audit opinion.
Similarly, a company will not be considered as meeting the profitability test for exiting the financial watch-list if its auditors have highlighted a material uncertainty relating to going concern.
SGX RegCo will also ignore artificial distortions to share prices that are not representative of true market demand in assessing share price or market capitalisation thresholds in the Mainboard and Catalist listing rules.
This includes the market capitalisation test for exiting the financial watch-list, it adds.
“SGX RegCo will continue to enhance our tools to prevent and detect manipulation,” SGX RegCo says in a May 11 statement.
The Monetary Authority of Singapore (MAS) says it welcomes the removal of MTP and the implementation of more pre-emptive and targeted tools to address the risk of market manipulation.
“MAS and SGX RegCo have also stepped up enforcement actions against market manipulation, and continue to work closely to enhance our toolkit to detect and deter market manipulation,” a MAS spokesperson says in a May 11 statement.
