Smaller Trading Lot Size

Singapore Exchange (SGX) had started trading in lot size of 100 instead of 1,000 since 19th January and there were expectations that it will attract more new investors, creating a surge in the trading volume. Or has it?

Investor Monkey - SGX Center

On the 19th of January 2015, Singapore Exchange (SGX) cut the minimum trading lot size to 100, down from its original 1,000. The original intent of the move was to attract more investors since investing in pricey blue chips like DBS Group Holdings (SGX: D05), United Overseas Bank Limited (SGX: U11) and Singapore Airlines Limited (SGX: C6U) has became more affordable.

Using Singapore-based bank DBS as an example, based on its closing price last Friday at S$19.38. To buy a lot prior to the change, would require S$19,380. The cost of buying one lot of the same shares will require only S$1,938, a price which is more affordable to most investors.

Three weeks have past since the minimum lot size was changed and it is clearly visible that the trading volume had not increased much as compared to past volume a year ago.

Investor Monkey - DBS trading volume

Although by reducing the lot size had made investing for younger or new investors more affordable, the minimum commission for online transaction at S$25 ranged from 0.24% to 0.35% per transaction charged by brokers still remains. This makes it even harder for smaller lot size investments to start profiting.

To achieve its intentions of attracting more investors into the market, the commissions collected from the investors will have to be reduced or adjusted proportionally.

Bottom Line

Without the reduction of the commission, profiting from the investment would not be as attractive. However, the doors to investment had been opened to new investors or those who do not have much capital. To profit from investing, it would be better to start early and the reduction of minimum lot size had made investment early much easier.

Rather than sitting on the sideline and hoping that one day SGX will adjust the commission collected for small trade size, which nobody would be able to tell when, why not start your investments whenever there is an opportunity today?

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