Bursa Malaysia has reduced the structure of tick size or the minimum price variation between the buy and sell price for a stock, effective from August 3.
In a statement here Thursday, it said the tick size was reduced in line with the current practice by global developed markets and more importantly, to create market depth, enable price discovery and boost liquidity in the local equities market.
"Investors rely on information such as tick sizes to estimate future movement of a counter's share price as well as form a gauge of market sentiment," Bursa Malaysia Bhd's chief executive officer, Datuk Yusli Mohamed Yusoff said.
He said the exchange anticipated this reduction of tick size would broaden participation from investors who are poised to provide more liquidity to the local market as investors can enter and exit the market more easily.
In addition, the smaller tick size would also enable investors and traders to take advantage of more trading opportunities with each price movement, however small it is.
"This is more evident with the advent of electronic access or Direct Market Access infrastructure which operates efficiently with smaller tick sizes," Yusli said.
To investors, this revised tick size structure means that the minimum price change of listed securities is now smaller.
For example, currently, a RM5.10 stock is quoted in multiples of five sen which means that the next tick up is RM5.15 and the next tick down is RM5.05.
With the new tick sizes, investors can now quote in multiples of one sen which will now see a RM5.10 stock go up to the next tick which is RM5.11 or next tick down which is RM5.09.
This will create more trading opportunities for both buyer and seller.
Bursa Malaysia said that the equity Exchange Traded Funds (ETFs) on the Main Board would also benefit from the change to a smaller tick size.
Currently, these ETFs have a tick size of one sen regardless of any price. In future, any ETFs below RM1.00 will have a tick size of 0.1 sen and ETFs that are priced between RM1.00 and RM2.995 will have a tick size of 0.5 sen.
For ETFs that are priced at RM3.00 and above, the new tick size will be one sen.
Meanwhile, the bond ETF maintains its extremely small tick size of 0.1 sen.
As to the bidding price for buying-in, Bursa Malaysia said that it would retain the ten ticks.
Arising from this, the buying-in price will be based on the current tick sizes instead of the new tick sizes to ensure that the buying-in price is attractive to potential sellers, it added.
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