In an announcement made on Monday evening, stock exchange operator Singapore Exchange Limited (SGX: S68) revealed that the standard board lot size for securities listed on its exchanges would be reduced from 1,000 to 100 units from 19 January 2015 onwards. Singapore Exchange had first sounded out about the change back in early August. But at that time, there were no details available. This time, the company has spelled out its plan. I’d let it tell you which securities are involved in the change: “The reduction will apply to ordinary shares, including shares traded on…
In an announcement made on Monday evening, stock exchange operator Singapore Exchange Limited (SGX: S68) revealed that the standard board lot size for securities listed on its exchanges would be reduced from 1,000 to 100 units from 19 January 2015 onwards.
Singapore Exchange had first sounded out about the change back in early August. But at that time, there were no details available. This time, the company has spelled out its plan. I’d let it tell you which securities are involved in the change:
“The reduction will apply to ordinary shares, including shares traded on GlobalQuote, real estate investment trusts, business trusts, company warrants, structured warrants and extended settlement contracts. Existing counters with board lot sizes of 100 or less units will remain unchanged.”
Other types of securities – such as exchange traded funds, American Depository Receipts, and fixed income instruments – would not have their lot sizes changed. But, it should be noted that there’re two exceptions regarding exchange traded funds: the SPDR STI ETF (SGX: ES3) and ABF SG Bond ETF (SGX: A35) would both see their board lot sizes be reduced to 100 units.
The benefits for investors: More choices
In particular, the reduction of the board lot size for the SPDR STI ETF (the lot size for the ETF currently stands at 1,000 units) would allow investors more choices when it comes to index trackers for Singapore’s share market benchmark, the Straits Times Index (SGX: ^STI).
There are currently two index funds which tracks the STI and they are the SPDR STI ETF and the Nikko AM Singapore STI ETF (SGX: G3B). At the moment, only the Nikko AM Singapore STI ETF trades in a board lot size of 100 units – with the change in lot size for the SPDR STI ETF, individual investors who would like to simply invest in “Singapore’s share market” as a whole would get one more affordable option.
The benefits for investors: Affordability
The lot size change also has other benefits for individual investors as it increases the accessibility of other highly-priced shares like those of DBS Group Holdings Ltd (SGX: D05) and Jardine Cycle & Carriage Limited (SGX: C07) – both shares are going for more than S$15 per share currently. More importantly, it also gives investors the freedom to build a portfolio based on a company’s value without having to worry too much about the affordability of its shares.
Individual investors are not the only ones who would benefit from this change. With the blue chips soon becoming more affordable, it might even lead to increased trading volumes for Singapore-listed shares as a whole. This could be a boon for Singapore Exchange.
In the company’s latest full-year earnings release for the fiscal year ended 30 June 2014 (FY2014), it saw a 4% decline in revenue to S$686.9 million. The drop was driven by a 17.5% decrease in the company’s Securities revenue to S$226.9 million as the daily average traded value of securities had declined. If trading volumes can pick up amongst highly-priced shares, it can help improve Singapore Exchange’s business.
Foolish Bottom Line
Although there might be positives for Singapore Exchange which comes with the board lot size change, there’s still some fuzziness when it comes to the actual impact as no one can be certain until the changes are actually implemented.
But when it comes to individual investors in Singapore, Singapore Exchange’s initiative has clear benefits. As a member of that group, I’m eagerly awaiting the arrival of 19 January 2015. Do you have any thoughts on the board lot size change? Feel free to share them in the comments section below!
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing doesn’t own shares in any companies mentioned.