The Singapore Exchange (SGX) has released a consultation paper aimed at making initial public o'erings (IPOs) on the mainboard more accessible to retail investors.

Two key proposals are being made  ' raising the minimum allotment of public subscription to 5 per cent of IPO invitation shares, and the introduction of a claw'back mechanism that acts to increase the public subscription proportion to between 10 and 20 per cent if demand for the stock is red'hot.

Currently, SGX listing rules for mainboard IPOs specify that the shareholding spread and distribution requirement for companies with a market capitalisation of below $300 million must have a minimum 25 per cent public 'oat held by at least 500 shareholders.

On the claw'back mechanism, SGX is proposing a 3'tier structure that caps the maximum claw'back at 20 per cent of the total o'ering size. Essentially, if the total demand for shares in the public subscription tranche is 15 times to 50 times the initial allocation, the claw'back mechanism will kick in to increase the allocation under the public subscription tranche to 10 per cent of the shares o'ered under the IPO.

If the total demand for shares in the public subscription tranche exceeds 50 times the initial allocation, the claw'back mechanism will increase the allocation under the public subscription tranche to 20 per cent of the shares o'ered under the IPO.

In the event of insu'cient demand however, shares may be transferred from the public subscription tranche to the placement tranche through a reverse claw'back mechanism. The SGX said the proposed rule revisions will make IPO shares, especially those which meet with high retail demand, more available to retail investors.