Reprieve for small investors as MAS reviews 5% collateral for stock trades

Singapore

THE Monetary Authority of Singapore (MAS) is reviewing an earlier plan requiring retail investors to place a 5 per cent collateral on their open positions come 2020.

The rethink has brought relief to industry players who fear the proposal will smother retail interest and market liquidity.

The proposed practice is part of the regulator's effort to instil responsible trading among retail investors and to enhance credit risk management for securities intermediaries. It is already prevalent in the US and Australia, where it is seen as necessary to encourage responsible online trading.

Regulators felt such a step will also help to protect broking houses' financial integrity in the event of a market downturn or huge losses incurred by a client, like during the 2013 penny stock crash which wiped out S$8 billion in market value from the Singapore market. Many remisiers…