From now on, share prices can go down by a maximum of 5% per day instead of their previous limit of 2%.
Meraj Mavis: The regulator has again changed the circuit-breaker’s lower limits in the stock market. From now on, share prices can go down by a maximum of 5% per day instead of their previous limit of 2%.
This new rule will be implemented from Thursday, according to the Bangladesh Securities and Exchange Commission (BSEC).
In the order, BSEC said that this was expedient in regulating share price movements in trading at the stock exchanges and was in the interest of the investors and the development of the securities market.
Upon asking whether the circuit-breaker’s new lower limits will boost the market or not, an official of BSEC, who spoke on condition of anonymity, told Dhaka Tribune: “Because of the condition, we have seen from the last few days that if the share prices come down by 2% most of these shares don’t find any buyers. In this situation, large institutional and individual investors could not trade large sums of shares. The number of transactions was also decreasing as well. That is why institutional and individual investors have been requesting us about raising the limit.”
“By demand of the market participants, it was decided to increase this limit at 3% and later set it to 5% yesterday,” the official added.
BSEC officials also said that the regulator would lift this new rule once the market gets back its momentum.
Akhter Hossain, an investor who has been investing in the capital market for the last 12 years said that the new changes will increase the number of buyers in the market because if the price goes down, the buyers will be more interested in buying the shares at a lower price.
“I think circuit-breaker’s new lower limits will boost the market,” he said.
“The stock market is almost always in the scene of manipulation and for these manipulations, there are sudden fluctuations in the market.”
He added saying: “If the regulatory body is strict about all kinds of manipulations then investors will also regain confidence. But whenever the BSEC is silent on this issue, investors lose confidence in making new investments in the market.”
In order the BSEC hereby directs on a temporary basis, that the DSE and Chittagong Stock Exchange (CSE) impose a standard downward price change limit (circuit breaker) at 5% instead of 2% based on the previous trading day’s closing price, it said.
The upper limit of the circuit breaker shall remain unchanged, it added.
In other words, the price of any share in the stock market can increase by a maximum of 10% in one day.
Earlier on March 9, this year, the regulator lowered the circuit breaker’s lower limit to 2% from 10% in an attempt to stop any free fall of the stock market index amid the global chaos following the start of the Russia-Ukraine war.
The market started falling sharply after Russia began the war on Ukraine on February 24.