Singapore’s stock market has suddenly become interesting again.

For years, many retail investors viewed the local market as predictable but dull — dominated by banks, REITs and dividend plays while excitement shifted elsewhere to the US, China or emerging tech sectors. Trading activity on the Singapore Exchange (SGX) often felt thin outside a handful of blue-chip counters.

But over the past 18 months, sentiment has started to shift.

The Straits Times Index has outperformed many regional markets, policymakers have stepped up efforts to revitalise equities, and a new SGX-Nasdaq listings bridge is now being developed to attract international growth companies to Singapore.

Hidden within all these developments is one topic that could quietly reshape how the local market functions: market making.

At first glance, “market making” sounds like technical financial jargon that only traders or institutions care about. In reality, it affects every retail investor who buys or sells shares.

It determines whether you can exit a stock easily.
It influences how wide spreads become.
It affects volatility, confidence and even whether institutional money enters the market.

Now the big question emerging is this: Should market making become compulsory for companies using the SGX-Nasdaq bridge?

The answer matters more than many investors realise.

Here are three key things retail investors should understand before this potentially major shift unfolds.

1. Liquidity Matters More Than Most Retail Investors Think

Most retail investors focus on stock prices.

Experienced investors focus on liquidity.

That difference is important.

Liquidity simply refers to how easily shares can be bought or sold without causing major price movements. A liquid stock has active buyers and sellers at all times. An illiquid stock may have large gaps between buyers and sellers, making it difficult to transact efficiently.

This is where market makers come in.

Market makers continuously quote buy and sell prices for a stock, helping ensure there is always some level of trading activity and price discovery. In exchange, they profit either from the bid-ask spread or through agreements with listed companies.

Nasdaq already requires companies to maintain multiple market makers. SGX currently does not impose the same requirement broadly across its market.

That difference is significant.

One of the longstanding frustrations among Singapore retail investors is that many SGX-listed stocks simply do not trade actively enough. Some small-cap counters can go hours — or even days — with minimal activity. Others experience extremely wide bid-ask spreads, meaning investors immediately lose money simply by entering or exiting positions.

This creates hesitation.

Retail investors become reluctant to buy lesser-known counters because they fear being “trapped” later if liquidity dries up. Institutional investors often avoid illiquid stocks entirely because large transactions become difficult to execute efficiently.

As a result, companies may list on SGX but fail to attract meaningful investor participation afterward.

That weakens the market ecosystem.

The SGX-Nasdaq bridge aims to attract growth-oriented companies and create stronger international connectivity. But if those stocks do not trade actively in Singapore, the initiative risks becoming more symbolic than transformative.

This is why mandatory market making is now entering the conversation.

Supporters argue that if companies are going to benefit from access to Singapore’s capital markets, they should also ensure investors have sufficient liquidity protections.

For retail investors, this could produce several benefits:

• Narrower bid-ask spreads
• More stable trading activity
• Better price discovery
• Easier exits during volatile periods
• Greater institutional participation

In short, liquidity creates confidence.

And confidence attracts more liquidity.

That cycle matters enormously in equity markets.

2. Market Making Is Helpful — But It Is Not Risk-Free

While market making sounds positive in theory, retail investors should also understand the risks and limitations.

Liquidity support is not magic.

One concern is the possibility of creating an artificial market.

If a stock appears active mainly because market makers are constantly posting quotes, investors may mistakenly assume genuine demand exists when actual investor interest remains weak.

This becomes especially problematic during market stress.

A stock can appear liquid during calm periods but suddenly lose support during volatility if market makers widen spreads aggressively or reduce activity. Global markets have experienced this before during periods of panic selling.

Retail investors therefore need to distinguish between:

• real investor-driven liquidity, and
• supported liquidity created through market-making arrangements.

The second issue involves incentives.

Different market makers operate differently.

Some profit mainly from bid-ask spreads.
Others receive fees directly from issuers.
Some attempt to remain market-neutral while others may take directional positions.

This creates questions around transparency.

If a listed company is paying for liquidity support, should investors know exactly how those arrangements work?
Should there be disclosure requirements?
Should there be limits on how market makers operate?
How should conflicts of interest be managed?

These are not minor questions.

Poorly designed market-making systems can damage trust rather than improve it.

Retail investors should remember that liquidity alone does not guarantee investment quality. A weak company with active market makers is still a weak company.

This is particularly relevant because speculative behaviour often emerges in lower-liquidity environments.

Singapore retail investors have already seen examples over the years where small-cap counters experienced sudden spikes, collapses or unusual trading patterns. Regulators are understandably cautious about introducing mechanisms that could unintentionally increase those risks.

This is why many market participants are now calling for a consultation paper before mandatory market making is introduced more broadly.

That would allow:

• investors to understand how the framework works,
• brokers and institutions to provide feedback,
• regulators to test safeguards,
• and issuers to assess costs realistically.

The key takeaway for retail investors is simple:
Liquidity support is beneficial — but transparency matters just as much.

A healthy market requires both.

3. This Could Eventually Extend Beyond Nasdaq Listings

Right now, discussion around compulsory market making is centred largely on the proposed SGX-Nasdaq bridge.

But investors should pay attention to the bigger picture.

If market making proves successful for dual-listed companies, pressure could grow to expand the model further across SGX.

And that could have major implications for the broader Singapore equities landscape.

The obvious area of focus would be small- and mid-cap stocks.

Despite recent improvements in market sentiment, many smaller SGX-listed companies still suffer from:

• low trading volumes,
• inconsistent price discovery,
• limited research coverage,
• and weak institutional participation.

For years, this has created a frustrating cycle.

Low liquidity discourages investors.
Low investor participation reduces analyst coverage.
Limited coverage reduces visibility.
Reduced visibility lowers liquidity further.

Breaking that cycle has always been difficult.

Compulsory market making could potentially become one solution.

If investors know they can enter and exit positions more easily, confidence may improve. Increased participation could then attract more analyst coverage and institutional interest over time.

However, this also raises practical questions.

Who pays for market making?

Would listed companies bear the cost?
Would brokers subsidise activity?
Would SGX provide incentives?
Would investors ultimately absorb the cost indirectly through spreads or fees?

There is also the issue of fairness.

If market making becomes compulsory for Nasdaq-linked listings, should existing SGX-listed companies be treated differently?
Would this create a “two-tier market” where newer listings enjoy better liquidity support than older companies?

Regulators will need to think carefully about these structural issues.

Still, the direction of travel appears increasingly clear.

Singapore wants to deepen its capital markets ecosystem.

The country already has strong banking infrastructure, regulatory credibility and wealth management capabilities. But transforming SGX into a more vibrant growth-equities market requires more than attracting listings.

It requires sustained trading activity.

That means liquidity can no longer remain a secondary issue.

Retail investors should therefore view the market-making discussion not as a technical adjustment, but as part of a much larger evolution taking place within Singapore’s financial markets.

Why This Matters for Everyday Retail Investors

Some investors may assume these developments only matter to institutions or high-net-worth traders.

That would be a mistake.

If SGX becomes more liquid and internationally connected, retail investors could benefit directly in several ways.

First, stronger liquidity generally improves execution quality.
Investors can buy and sell shares more efficiently with lower slippage.

Second, broader international participation may attract stronger companies to list in Singapore.

Third, improved liquidity often increases market confidence overall, encouraging more participation from institutional funds, family offices and global investors.

Fourth, a healthier market ecosystem can create more opportunities beyond traditional dividend investing.

For years, many Singapore investors felt they needed US markets for growth exposure while SGX remained primarily an income market. The SGX-Nasdaq bridge and broader liquidity initiatives may gradually change that perception.

Of course, none of this guarantees success.

Market structure reforms take time.
Investor behaviour does not shift overnight.
Liquidity cannot be forced permanently if underlying investor demand remains weak.

But the conversation itself matters.

For the first time in years, Singapore’s equity market is no longer discussing survival.
It is discussing expansion.

That is a major psychological shift.

The Bottom Line

The debate around compulsory market making may sound technical, but it ultimately comes down to one simple issue: investor confidence.

People invest more actively when they believe markets are fair, efficient and liquid.

Singapore has already made significant progress in revitalising its equities market through policy support, stronger investor engagement and renewed international positioning.

The next challenge is ensuring those improvements translate into deeper trading activity.

Mandatory market making for SGX-Nasdaq dual listings may become one important piece of that puzzle.

Done properly, it could strengthen liquidity, narrow spreads and improve confidence across the market.

Done poorly, it could create distortions and weaken trust.

Either way, retail investors should pay close attention.

Because the future direction of SGX may depend not only on which companies choose to list here — but also on whether investors believe they can trade those stocks confidently once they arrive.