BSEC resets floor price to curb market volatility

The securities regulator BSEC has once again set the floor price for stocks in a set of measures aimed at curbing volatility in the markets.

“Opening price of any listed security shall be set at the average of the closing price of July 28, 20220 and closing price of immediately preceding four trading days,” said the Bangladesh Securities and Exchange Commission (BSEC) in an order on Thursday.

“The average price, calculated for each security, will be considered as the floor price and the lowest limit of the circuit breaker,” it said.

The order went into effect immediately and will remain in force until further order, according to the order.

The BSEC move comes after the DSEX index of the Dhaka Stock Exchange (DSE) fell below the milestone or psychological limit of 6,000- level after 13 months.

“The latest move was taken considering the recent global economic situation and protecting the investor interest,” said the BSEC.

Earlier, the securities regulator took a similar measure in an effort to contain free fall of shares prices during the Covid-19 outbreak on March 19, 2020 when the DSEX went below 3,000-level.

Then the floor price was lifted in phases between April and June last year. Following the withdrawal, the DSEX hit its peak at over 7,000-level on October 10 last year.

The stock market began to bleed again taking cue from Russia’s invasion of Ukraine in February. In recent days, the stock market started to slump as the economic uncertainty rattled the investor confidence.

When a floor price is fixed, no company’s shares will be traded below the fixed price. If the share price of a company is trading at the floor price, then that will be the lowest price of that company. In addition, the BSEC said the upper limit of the circuit breaker and other existing conditions will remain unchanged.

In case of corporate actions relating to dilution effect, floor price of a listed security shall be adjusted or diluted market price or reference price or floor price on immediate prior record date on the basis of declared corporate actions relating to stock dividend or right issue, it said.

Floor price for the newly listed security shall be the reference price for the closing price of the first trading day, it added. On May 25, 2022, the BSEC lowered the circuit breaker limit to 2 per cent from the existing 5 per cent.