I am used to 1,000 units as standard board lot size for securities traded on the Singapore Exchange. I buy and sell in multiples of 1,000 units of shares and my equity portfolio has shares in multiples of 1,000 units. (I avoided scrip dividends and opted for cash dividends instead.)
Since 19January 2015, the standard board lot size is now 100 units instead of 1,000 units. This allows retail investors to buy into blue chips at 100 units at a price that can be affordable. Take the example of buying into 100 units of DBS and the total contract price is $1,945 ($19.45 per unit). In the past, the investor had to fork out $19,450 for 1,000 standard board lot size.
However, this new arrangement had an unintended effect on me. I wanted to buy 1,000 of M1 at $3.85 on Wednesday. At the end of the trading day, only 900 units are fulfilled at that price. I was still short of 100 units. If I buy 100 units of M1 the next time round, I will have to pay a new broker’s commission. That will be double commissions to pay for 1,000 units of M1 in this case.
The broker’s commission has a minimum amount (e.g. it is S$25 minimum for DBS Vickers on-line trade). To buy 100 units of M1 at $3.85, one has to pay commission of $25. This works to be 6.5% of contract value! This does not make sense. (Note: CNY promotion aside in this explanation. See earlier blog post.)
With the 100-lot size trading environment, I have to change my mindset from now on. It is OK to have 900 units or any multiple of 100 units in my portfolio of shares. I have to also watch the broker’s commission carefully since different contract value (however low in contract value) attracts minimum commission amount. It is a different ball game when compared with the past.
Copyright © 2015, limkimtong for Living Investment
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