KARACHI: The Regulatory Affairs Committee (RAC) of the Pakistan Stock Exchange (PSX) has proposed to introduce new counter for trading in less liquid stocks and implementation of general framework for listed companies in violation of PSX regulations.
In this regard the PSX has solicited public comments on said regulatory changes.
According to the RAC of PSX, the ready delivery contract market shall comprise of two counters including normal stock counter and less liquid stock counter.
The PSX shall setup a separate counter for trading of less liquid stocks an equity stock shall be classified as less liquid stock if it is below any of the thresholds relating to free float numbers of day s treated, average daily traded value and average daily traded volume as prescribed by the exchange from time to time with prior approval of the commission.
Free float means the number of ordinary shares that are readily available for trading through the exchange. It consists of all outstanding shares, excluding ones that are held by the sponsors, directors, government, associate companies, substantial shareholders and foreign direct investors.
A company’s stock becomes less liquid, or illiquid, when limited availability of tradable shares makes it difficult for the general public to buy or sell it on the exchange.
The exchange shall conduct a review of listed equity stocks every quarter based on data available for last three months to determine the list of stocks at the start of each quarter which shall be traded on less liquid counter for the next quarter.
The volume-weighted average price (VWAP) of all trades executed during the last auction session of the day, in case of no trade is executed during the last call auction session the VWAP of the all trades executed during second last call auction session.
A new proposed insertion in regulations suggests that where a security is placed on the less liquid stock counter of ready delivery contract market, then the circuit breaker of 20 percent of Rs 5, whichever is higher, shall be applicable from the closing price of the previous day.
Only eligible unique identification numbers (UINs) as specified under National Clearing Company of Pakistan Limited (NCCPL) Regulations shall be allowed to trade in less liquid stocks. However, an ineligible UIN as per NCCPL Regulations shall be permitted to sell the less liquid stocks he already holds.
Published in Daily Times, August 26th 2017.
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