SGX proposes ‘trade at close’ session after closing auction

Singapore 50 dollar bill

Singapore Exchange said on Friday that it was seeking public feedback on its proposal to introduce a “trade at close,” or TAC, session to take place after the closing auction routine ends.

During a five-minute-long TAC session, traders would be able to execute orders at the closing auction price for ready and unit share markets, it said in a statement on Friday.

“It is not intended to extend the price discovery process. It is meant solely to allow participants to trade additional volume at each day’s closing price (represented by the day’s closing auction price), after that price has been determined,” Singapore Exchange said in its consultation paper.

“The functionality will benefit participants who want to close their positions at the end of the trading day at the closing price. It will also benefit participants, e.g. institutional investors, who want to trade large volumes but were unable to obtain those volumes in the closing auction,” the paper said.

The TAC session would only occur for an individual security if the closing auction on that trading day resulted in a closing auction price for it, SGX said in the consultation paper, adding it wouldn’t use any other price because may not accurately reflect the security’s current market value.

Orders not matched during the closing routine would be automatically included in the TAC market phase, but market orders wouldn’t be considered for matching, it said.

Orders would match only at the closing auction price, based on time priority favoring earlier orders, and orders could be amended, but must be priced at the closing auction price, Singapore Exchange said.

The market closing time would remain at 5:06 P.M. SGT on normal trading days and 12:06 P.M. SGT on half-day trading, but SGX would shorten the trading phase preceding the closing routine by five minutes to 4:55 P.M. SGT on a normal trading day and 11:55 A.M. SGT on a half-day, it said.

“The introduction of the ‘trade at close’ session will allow investors to trade at a fixed price, namely the closing price of the security, while preserving the integrity of the price discovery process. This is part of SGX’s ongoing commitment to bettering its market structure and enhancing trading,” Nico Torchetti, head of market services, said in the statement. 

SGX said it would accept public feedback on the proposal until 11 October, and if adopted, the TAC session would be implemented in July 2019, along with the upgrade of the Reach ST trading engine.

Get the Shenton Wire morning briefing in your inbox