TRADING costs for shares - from penny stocks to big-cap blue chips - fell substantially over the past 12 months while the average daily number of trades increased, according to a Singapore Exchange (SGX) report out yesterday.
The SGX said the outcomes were likely due to the initiatives it introduced last year, such as reducing minimum bid spreads.
The minimum bid spread refers to the smallest price movement allowed in a stock or trading instrument.
For example, shares priced below 20 cents now have a minimum bid size of 0.1 cent. This means their prices can move up or down by 0.1 cent at the least.
Since the new spreads were introduced in July last year, stocks priced from $1 to $1.99 have had a minimum bid size of half a cent. The minimum bid size for stocks $10 and above is now one cent.
Slashing minimum bid spreads reduced costs for investors, who incur a clearing fee of 0.04 per cent on the value of each trade they make, up to a maximum of $600. The SGX report said the move has had its intended effect.
Large capitalisation or large- cap stocks saw trading costs steadily decline in the third quarter of last year, from eight basis points to five basis points or 0.08 per cent of the value of the trade to 0.05 per cent.
It remained relatively stable at 0.05 per cent until May, when there was a further one basis point decline in costs.
Trading costs for mid-cap stocks halved to 0.06 per cent in June from a year before.
Costs for small-cap stocks at first increased from 0.76 per cent of the trade's value in July last year to 0.99 per cent in January but there has been a substantial decline in cost to 0.47 per cent since.
"The decline in trading costs for large- and mid-cap stocks after June 2011 is a likely result of market liquidity enhancing initiatives such as the changes to minimum bid spreads in July 2011," the SGX said in its report.
"In June 2012, there was a further sharp decline in price impact cost across all size categories, despite lower volumes."