The Singapore Exchange is seeking feedback on whether it should introduce volatility controls to the securities trading auction process, to protect investors from extreme price swings.THE Singapore Exchange is seeking feedback on whether it should introduce volatility controls to the securities trading auction process, to protect investors from extreme price swings.
Tan Boon Gin, chief executive of SGX Regco, told reporters on Monday that the traditional remedy after a price dislocation has taken place is to cancel the trade that caused the price-dislocation. The wider 30 per cent price collar for the pre-open takes into account the fact that more news may have come in overnight since trading closed, so a wider band is needed to allow price discovery. The tighter 10 per cent collar for the middle and the end of the trading day is consistent with the 10 per cent threshold on the circuit breakers.
A notification will be blasted to brokers if a time extension is triggered, and a status indicator will appear next to the ticker, similar to what is seen when circuit breakers have been triggered. The volatility controls will apply only to stocks, exchange-traded funds and other securities for which circuit breakers have been imposed, namely liquid securities that account for around 80 per cent of trading activity in the Singapore market.