Implementation of the New Minimum Trading Price Framework
Fortis Law’s lawyers’ article on “Implementation of the New Minimum Trading Price Framework” has been published and featured in the Asian Legal Business.
Authors: Vanessa Ng & Markus Poh
The Singapore Exchange Securities Trading Limited (“SGX-ST”) introduced the minimum trading price (“MTP”) framework on 2 March 2015 for Mainboard-listed companies, which came into effect on 1 March 2016 after a one-year transition period.
The SGX-ST consulted on proposals on 23 August 2016 (“August 2016 Consultation”) to refine the MTP framework with the addition of a market capitalisation test, and on 2 December 2016, the SGX-ST issued its response to feedback received on its proposals and stated that it will proceed to implement the revised MTP entry criteria as proposed in the August 2016 Consultation.
Revised MTP Entry Criteria
With effect from 2 December 2016, an issuer will be placed on the MTP watch-list if (“Revised MTP Entry Criteria”):
- its 6-month volume-weighted average price (“VWAP”) is less than S$0.20; and
- its average daily market capitalisation is less than S$40 million over the last six months.
Similarly, issuers may exit from the watch-list if their VWAP is at least S$0.20 and their average daily market capitalisation is more than S$40 million over the last six months (“Revised MTP Exit Criteria”).
Frequency of Reviews
Under the new MTP framework, SGX-ST has reduced the frequency of reviewing whether an issuer should be placed on the MTP watch-list from quarterly to half-yearly, so as to better align the review timing and the look-back period to be consistent with the financial entry criteria. The half-yearly review will take place on the first market day of June and December of each year.
Consistent with the Revised MTP Entry Criteria, the SGX-ST carried out a review on 1 December 2016 and removed 14 MTP issuers from the watch-list with immediate effect as they do not trigger the Revised MTP Entry Criteria.
The issuers remaining on the watch-list under the MTP framework will be reviewed under the Revised MTP Entry Criteria on 1 June 2017, and if the Revised Entry Criteria is triggered for such an issuer, it will have a cure period of 36 months to exit from the watch-list under the Revised MTP Exit Criteria.
However, where an issuer fails to satisfy the Revised MTP Exit Criteria within 36 months of the date on which it was placed on the MTP watch-list, SGX-ST may remove it from the Official List of the SGX-ST Mainboard or suspend trading of its listed securities with a view to removing it from the Official List.
Written by: Vanessa Ng and Markus Poh