Besides, the market is ready to welcome the launch of two exchange-traded funds (ETFs), which will include a basket of around 10 selected stocks each and their units would be available for trade like shares of companies listed at the
'The existing circuit breaker of 5% or Re1, whichever is higher…shall be enhanced by 0.5% every 15th day till the time the circuit breaker reaches the level of 7.5% or Re1, whichever is higher,' PSX GM and Acting Chief Regulatory Officer
The revised limit will stretch the band of two-way price movement to 15% as a share could move up to 7.5% upwards and 7.5% downwards from the last closing price on working days.
The exchange has decided to revise the cap and floor pricing limits of stocks at the time when the benchmark KSE-100 Index is anticipated to increase by a massive 20-25% in the new-year which started on
'The enhancement of circuit breakers would allow true price discovery on a relatively faster pace,' PSX General Manager Product Management and Research
There is a hot argument in the market over why the increase in share price is capped at 5% while it has the potential to make larger gains. For example, if a share, priced at
'Such limits for individual stocks are set at 10% in most of the markets around the globe,' he said.
The circuit breakers were introduced at world to apply curbs in order to reduce market volatility and massive panic sell-offs, giving traders time to reconsider transaction.
There was a time when such circuit breakers stood at 10% at PSX years back. However, the limits were first reduced to 7.5% and then to 5% at the times when the market was caught in huge crisis of confidence and record steep declines every day in 2008.
Index-based market halts
Besides, the trading would come to a halt at PSX in case the KSE-30 Index moves either way by 4% from its opening index values with effect from
Later on, the market would freeze when KSE-30 Index hits 5% from the time once the scrip-based limits are fully enhanced to 7.5% compared to 5% at present.
'Where KSE-30 Index moves 4% (these days) or 5% (later on), as applicable, either way, for consecutive 5 minutes, market halt shall apply for 45 minutes. It may be noted that market halt shall not be applicable in case KSE-30 Index moves beyond 4% or 5% as applicable in the last 1 hour of the market,' Mirza said in the notification.
Launch of ETFs
Raza said
JS Global would perform the function of market maker, meaning it would remain available to buy and sell units of the ETFs at every points of time though PSX trading platform. 'ETF units would be available for trade like share of firms at PSX,' PSX GM Product Management and Research said.
The unit price of ETFs would be average price of all the expected 10 stocks in the basket. The diversified stocks in ETFs portfolio help investors mitigate risk factors.
© Pakistan Press International, source