Singapore Exchange (SGX) announced today that the securities clearing fee rate will be reduced from 0.05% to 0.04% of the contract value. At the same time, the maximum clearing fee will be raised from $200 to $600. These changes will come into effect on 1 March 2007.
The reduction in the clearing fee rate will result in lower clearing fees for trades below $500,000. The overwhelming number of contracts traded in 2006 were below this size and therefore most market participants will benefit from this revision. For trades above $500,000, the revised fee structure remains competitive compared to other major regional exchanges.
SGX will also be making adjustments to the minimum bids schedule, including reducing the minimum bid size for higher priced stocks, by mid 2007. The reduction in bid size will narrow the bid-ask spread, a significant component of transaction costs particularly for proprietary traders and institutional participants.
Together, the revisions to both the securities clearing fee and minimum bids schedule aim to lower transaction costs and improve market efficiency.
Mr Hsieh Fu Hua, CEO of SGX, said: “These initiatives clearly demonstrate our commitment to improve overall market competitiveness, and enhance market liquidity. We believe these changes will encourage greater investor participation and foster a more vibrant marketplace.”
Based on SGX’s last five financial years, the fee revisions are generally revenue neutral as higher revenues from raising the fee cap would have been offset by a decline in revenues from lowering the fee rate. However, taking the last reported financial year alone, ending 30 June 2006, the fee revisions would have increased SGX’s total operating revenue by approximately three per cent.
Going forward, the financial impact of the fee revisions will depend on the actual level and composition of market activity.
