Commentary: Liquidity fix for small and mid-caps on SGX requires more to be done

Singapore Exchange (SGX) chairman Koh Boon Hwee recently remarked that small and mid-cap enterprises on the local stock market should not rely on SGX to enhance their valuations, as the exchange does not generate liquidity or stimulate demand and supply. He emphasized that listed companies should proactively communicate their strategies to investors so they can better comprehend the firms' business models and growth potential.

However, former editor and financial journalist Ven Sreenivasan contends that SGX could do more to address the issue of poor liquidity for these enterprises. While the bourse has played a role by highlighting certain companies through investor education activities, the EQDP has not significantly impacted secondary trading and liquidity on SGX.

One potential solution is to eliminate SGX clearing and trading fees to reduce friction costs for proprietary traders and market makers. Additionally, SGX member brokerage firms could hire in-house proprietary traders who trade using their own capital, providing market liquidity, similar to the pre-2013 market conditions.