Singapore stock exchange to use 10pc trading circuit-breakers after plunges
Measure comes after three stocks plunge to erase US$6.9b market value
Singapore Exchange, Southeast Asia's biggest bourse, plans to add circuit breakers by early next year after a plunge in shares of three commodity companies erased US$6.9 billion in market value over three days.
Under the proposal, trading of a stock would be halted for five minutes if it breached 10 per cent in either direction, the exchange said in response to queries.
The exchange sought public feedback on the plan in June, it said.
"We aim to introduce the dynamic circuit breakers by early next year subject to regulatory approvals," Joan Lew, a spokeswoman for the exchange, said in the statement on Thursday.
The exchange imposed trading restrictions this week on Blumont, Asiasons Capital and LionGold after their stock prices plunged.
Trading caps to prevent sharp gains or losses will give investors time to assess their holdings, according to Liquidnet and the Securities Investors Association of Singapore.
Regulators worldwide have evaluated safeguards since the May 2010 plunge known as the flash crash briefly erased about US$862 billion from the value of US equities.
American exchanges have implemented a limit-up/limit-down initiative that prevents market makers from quoting shares at prices deemed too far above or below current levels.
The city's plan for circuit breakers "should help minimise market manipulation", said Kelly Teoh, a strategist at IG Asia. "The regulator can hold all directors responsible including non-executives or at least have the process in place to bring them in for questioning if the circuit breakers are breached more than once."
The exchange said on Sunday that shares of the three companies had been declared designated securities, prohibiting investors from selling them unless they hold the same quantity of stock.
Buyers must make cash payments for the transactions, it added.
It said in a separate statement there were short sales on Blumont and Asiasons on October 7, contrary to trading directions it gave after classifying them as designated securities.
"We will be investigating these cases and take the appropriate disciplinary actions as necessary," said Kelvin Koh, the head of market surveillance at the exchange. "SGX will continue to monitor closely the market in the three designated securities. We will assess the trading conditions and lift the designation as soon as it is appropriate to do so."
Blumont, which invests in minerals and energy, slumped 94 per cent over two trading days - on October 4 and 7. That shaved S$4.9 billion (HK$30.4 billion) off its market value, prompting the company to scrap a proposed S$146 million acquisition of Australia's Cokal.