Published
on Apr 09, 2013
THERE
are many stocks on the Singapore Exchange (SGX) that are trading in the
sub-pennies category. These are stocks priced below 20 cents, which are
invariably traded in the hundreds of millions as it does not make sense for
traders to trade them at very low volumes.
These stocks make up the majority in the daily Top Volume
report, and give a false picture that they are the more actively traded stocks.
A better parameter would be "Top Value", bearing in mind that SGX and
broker revenues are a function of traded value and not traded volume.
Measuring
market activity by market volume or trading volume is erroneous. What is
important is the total value of stocks traded.
However,
the really important question is: How much of this traded value comes from retail
investors ("Retail investors take a bigger bite of SGX pie"; April
1)?
Retail
investors should not be defined as non-corporates. I suspect most of the volume
that is attributed to retail investors comes from proprietary traders, dealers
or remisiers, or stock operators.
The
real retail investors, if defined as the man-in-the-street investors, may be in
the minority. Ask the dealers and remisiers who are servicing these retail
investors, and a different picture will probably emerge.
In
fact, many remisiers are struggling to survive, given the dearth of retail
investor participation, and many have to resort to self-trades to earn some
income, at great risk to themselves. Remisiers' take-home pay has decreased and
many have left the industry or are contemplating doing so.
More
must be done to get more retail investors into the market. It is heartening to
note that the SGX has embarked on this.
Also,
the SGX can make it cheaper for retail investors by reducing some fees, for
example, clearing fees and terminal fees. It should also do away with its
forced key charges, and requiring retail investors to mark short-sell orders.
The
Monetary Authority of Singapore must also do its part by making it easier for
retail investors to invest and trade freely, and not put up roadblocks by way
of unnecessary rules and regulations, like requiring investors to take a quiz.
Vincent
Khoo
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