New trading rule to promote liquidity

Published: Monday July 21, 2008

THE BARBADOS STOCK EXCHANGE (BSE) is about to implement a price stabilisation rule to govern stock trading in an effort to promote liquidity in the capital market.

BSE general manage Marlon Yarde told BARBADOS BUSINESS AUTHORITY that the rule could be implemented as early as next month and was also meant "to ensure that the true market prices are reflected in our shares".

The price stabilisation rule would "replace the previous notice regarding price movement of stock and facilitate conformance with international best practice, ensure the efficient operation of the market and further promote the integrity of the capital market," the Securities Commission said in a notice last year soliciting comments on the new rule.

The new price regulation states, "The general manager or in his absence the operations manager of the exchange may halt trading in a security for a period of not more than two hours if the offer price or the bid price rises or falls more than ten per cent above or below the closing price of the previous day's trading without apparent reason.

"A trading halt will only occur once in a trading session for any one security."

Yarde pointed out that the Securities Commission had already granted approval to institute the rule, which would be activated once the BSE had tweaked internal processes and apprised brokers of how it will work.

"The whole idea behind the price stabilisation rule is to let market forces dictate how the prices of shares move on our board. [And] one of the objectives is to improve liquidity in the market," he said.

He noted, "There is still that ten per cent upper limit, but once it hits that ten per cent, we will halt trading so that the market is aware that the share price is moving above the ten per cent limit.

"And this would give brokers in the marketplace an opportunity to advise their clients, 'This share price is moving up or moving down by more than ten per cent; what are your instructions on buying or selling this particular security'."


Source: Nation Newspapers
http://www.nationnews.com/story/293346539820587.php