For an investor accustomed to the Straits Times Index, trading a small-cap SGX stock can feel like entering a different market altogether. The bid-ask spread is wider, the quoted size is smaller and the time between trades can stretch from minutes to hours or days. These are not abstract inconveniences. They are direct costs that shape portfolio construction, valuation and the willingness of companies to list in Singapore in the first place. The GEMS Market Making Grant is designed to change that experience for an initial cohort of around 80 stocks.
What “Market Making” Actually Changes on the Screen
A designated market maker commits to quoting both a bid and an offer on a continuous basis, within prescribed spread and size parameters. For a stock that previously traded only when a natural buyer and seller happened to coincide, the presence of a standing quote changes the basic economics of participation. An investor who wants to sell no longer needs to wait for a matching buyer; they can transact against the market maker’s bid, accepting the spread as the cost of immediacy. An investor who wants to buy can do so without placing a speculative limit order and hoping for a fill. The spread may still be wider than that of a large-cap stock, but it becomes a known, manageable cost rather than an unpredictable barrier. MAS explicitly frames the grant’s objectives in these terms: tighter bid-ask spreads, reduced execution costs and stronger price discovery.
Why Price Discovery Matters as Much as Liquidity
Illiquid markets do not simply make trading expensive; they make prices less informative. When a stock trades rarely, the last transacted price may reflect stale information, a forced seller or a single idiosyncratic buyer rather than the collective judgment of the market. This weakens the signal that the share price sends to management, creditors, employees and potential investors. A market maker contributes to price discovery by continuously updating quotes in response to order flow and information, creating a denser sequence of price observations. Over time, this can narrow the gap between a company’s fundamental value and its market price, reducing the valuation discount that investors demand for illiquidity. For companies considering an IPO or secondary fundraising, a more informative share price is not a cosmetic improvement—it directly affects the cost of capital.
The Selection Logic: Why These 80 and Not Others
The grant is not universal. MAS has specified that eligible stocks must have a minimum level of trading activity, distinguishing them from the most thinly traded tail of the market. This selectivity reflects a practical judgment: market making is most effective where there is already a baseline of investor interest that can be amplified, rather than where no natural demand exists at all. The list will be reviewed regularly to add stocks that can benefit from enhanced support, creating a pathway for companies that improve their liquidity profile to access deeper quoting support. The initial cohort of 80 should therefore be understood as a pilot, not a permanent designation. Companies outside the list have an incentive to increase free float, broaden shareholder bases and improve disclosure to qualify for future inclusion.
The Issuer’s Perspective: A Listing That Trades
For founders and private equity investors, the liquidity of a stock after listing determines whether the IPO is a genuine exit route or merely a paper milestone. A company whose shares trade once a week at a volatile price is effectively still private from a liquidity standpoint, even if it carries a public ticker. The market-making grant changes that calculus by making the aftermarket a functioning venue for price discovery and position adjustment. This matters for the entire listing pipeline. If Singapore can demonstrate that small- and mid-cap companies receive meaningful aftermarket support, the venue becomes more attractive relative to regional exchanges where listing is easier but trading is equally thin. The broader market data already shows momentum: small- and mid-cap daily average trading value rose 155% in FY2026 to S$310 million, and institutional net buying in the segment tripled to S$606 million. The grant aims to build on that momentum rather than create it from scratch. The official MAS media release provides the detailed eligibility and review framework: https://www.mas.gov.sg/news/media-releases/2026/MAS-Appoints-Third-Batch-of-EQDP-Asset-Managers.
What Investors Should Watch
The grant’s impact will not be visible overnight. Investors should monitor three indicators: the persistence of spread compression after the initial quoting period, the growth in average trade size (a sign of genuine depth rather than merely more frequent small trades), and the entry of new institutional holders into the eligible stocks. If these indicators move in the right direction, the 80-stock cohort could become a template for a broader re-rating of Singapore’s small- and mid-cap universe.
Leave a Reply