When Bursa announced it few months earlier, I thought there will also be tick sizes change for counters below RM1. So it is surprise for me, when there is no change at all.
I think counters below RM1 that is more in need of tick sizes changes.
For penny stocks (depend on the price) there can be 10% difference between the top buy quote and top sell quote. The gap (because of tick rules) in each quote price (also between bidding price) is so large that it doesn't cover the traders that want to buy or sell somewhere in between those gaps (say 3%). Less liquidity. Every buyer and seller need to wait the price move in at least 10% then only a price is done.
Let use M-TONE (among last week's top 40 high volume counter last week) as an example:
Buyer and seller quote is at 0.055 0.060
Next buyer and seller is at 0.050 0.065.
There's 9% difference between buyer and seller quotes. Also known as 'spread'.
There also 8% difference between next best seller bidding price.
Every buyer and seller need to wait the price move in at least 9% then only a transaction is done. This is not a problem for over RM1. For example, for RM5 share. Buyer and seller need only 0.02%.of price movement then a transaction is done.
For penny stocks (depend on the price) there can be 10% difference between the top buy quote and top sell quote. The gap (because of tick rules) in each quote price (also between bidding price) is so large that it doesn't cover the traders that want to buy or sell somewhere in between those gaps (say 3%). Less liquidity. Every buyer and seller need to wait the price move in at least 10% then only a price is done.
Let use M-TONE (among last week's top 40 high volume counter last week) as an example:
Buyer and seller quote is at 0.055 0.060
Next buyer and seller is at 0.050 0.065.
There's 9% difference between buyer and seller quotes. Also known as 'spread'.
There also 8% difference between next best seller bidding price.
Every buyer and seller need to wait the price move in at least 9% then only a transaction is done. This is not a problem for over RM1. For example, for RM5 share. Buyer and seller need only 0.02%.of price movement then a transaction is done.
For very actively trade penny stocks, for example M-Tone probably there will be no problem (when it is active at this period). In fact after you buy quote is done, you can immediately queuing for sell. Both can be at best quoted and you stand to gain 9% intra-day.
However, at other time and for other penny stocks, this is normally not the case. You can be queuing very long because you can only buy (or sell) at say 9% difference. So are other buyer and seller.
Because of less liquid, sometime only partially is done and the brokerage cost (in %) can be much higher than normal. Example: If only 1,000 unit of M-Tone at RM0.055 is done, your brokerage cost is at 72% (excluding stamp duty etc).
For other mid-range priced counters, I don't think they in need of these reduced tick sizes much. According to some opinion, reduced tick sizes will attract buying because of 'perceived low cost'. In practice, this will not effect much. Assuming I want to buy at best quote price, I will just queue at less no. of share if the tick is 2 cent and more units if it is 1 cent, since the my buying budget is the same. Especially when you are a fund manager with high buying budget, this not an issue at all, you just buy when you want to buy.
However, it's true that in term of 'liquidity', it is better. This apply a lot for very expensive counters.
Whatever, demand is always the king and overrules every tick sizes and everything I wrote above.
Tick sizes for KLSE (started 3rd July 2009) :
:
