TSE Bans Day Trading Until Further Notice

EghtesadOnline: Tehran Stock Exchange on Saturday banned day trading until further notice, a move seen to encourage investors to adopt “a buy and hold” approach.

News ID: ۷۵۱۱۰۲

27 September 2020

In a notice published by the Securities and Exchange News Agency (SENA), the TSE said it will change the transaction date from T+0 to T+1, which means that buying and selling the same share is not possible in one  session.

Day trading is the act of buying and selling securities within the same day or even multiple times over the course of a day. It is, by nature, speculation in securities, which involves making trade that lasts for seconds or minutes, taking advantage of short-term fluctuations in the price of an asset.

According to SENA, the same restrictions will be applied to trade at Iran Fara Bourse, the junior equity market, from Sunday.

The decision came after the bourse went through a sideways trend, after jumping sharply in the first four months of the current fiscal year, causing speculators to exploit price fluctuations.

A sideways market, or sideways drift, occurs where the price of a security trades within a fairly stable range without forming any distinct trends over some period of time.

Day trading had allowed speculators, well-versed in recurrent price patterns, to buy shares at minimum daily price and sell them at the maximum price level in the same day.

“The decision was a response to calls from market participants… the bans will be in place until further notice,” SENA quoted the TSE chief, Ali Sahraee, as saying.

Questioning the ill-advised practice, Sahraee asked “why should investors, individual or institutional, be able to sell shares that are bought on the same day”.

Observers say day trading is at odds with the very nature of investment in the share market, where long-term investment seems to be the norm.

Sahraee noted that day trading had undermined efforts by market makers, assigned by the regulator to help the liquidity of the shares, to lift the sloppy stock market.

In a similar move last week, the stock market regulator banned algorithmic trading to balance supply and demand.

Algorithmic trading is the process of using computers programmed to follow a defined set of instructions (or algorithms), accounting for variables such as time, price, and volume, for placing a trade in order to generate profits at a speed and frequency that is impossible for a human trader.

With such and other measures over the past month, stock market officials have been struggling to prop up Tehran’s bourse, which went into a tailspin from early August.

Following historic gains since the beginning of the current fiscal year in March, the benchmark of Tehran Stock Exchange, TEDPIX, grew close to 270% before diving deep into the red and paring close to 30% of past gains.