The Singapore Stock Exchange (SGX) will reduce the minimum bid size for securities traded on its platform from next week. This would further reduce the cost of trading on the exchange. Futures and options contract of India's S&P CNX Nifty are widely traded on SGX. In 2008 when Indian banned use of offshore derivative instruments, trading in SGX Nifty reached all time high.
The revised minimum bid size and wider forced order range will apply to all securities traded on SGX except exchange traded funds, loan stocks and bonds. Apart from Nifty, benchmark equity indices from Japan and China too are listed on SGX.
SGX move is expected to lead to a tightening of bid-ask spreads by as much as 80%. As a result, Singapore will offer one of the Asia’s most cost-competitive trading environments with an estimated $1.7 billion in annual savings, based on 2010 market turnover.
Chew Sutat, head of Securities at SGX, said, “This initiative addresses our customers’ need for more cost-efficiency and trading opportunities. Tighter spreads will encourage investors to increase their participation in SGX, the best market for accessing fast-growing Asia. This will in turn enhance liquidity here in Singapore.”
To cater to the narrowing of the bid sizes, SGX will widen the forced order range for all securities to +/- 20 bids from +/- 10 bids across all price ranges. Forced order range is a pre-execution mechanism which helps investors to avoid error trades when entering prices of orders. Any orders outside the forced order range must be confirmed by the use of the forced key function before those orders can be submitted.