SEO Rolls Back Decision on Daily Price Spread

EghtesadOnline: The Securities and Exchange Organization, the stock market regulator, Monday restored the daily stock price limitation to where it was in February when it decided to control limit ups and downs to boost the depressed bourse.

News ID: ۷۸۶۴۴۴

11 May 2021

Under the wrong impression that by setting limits on daily share prices it could save the market from further collapse, the SEO on Monday backtracked and said share prices henceforth can change ±5% -- the fluctuation range that existed for years before the SEO decided to twist it in February.

The decision will take effect on Saturday. The SEO also said it plans to increase the price spread in the future subject to proper market conditions.

Struggling to find a way to support retail shareholders and avoid further loss in share prices, the SEO in mid-February announced that  share prices must spread from -2% to +6% in one day.

As per the limit, set in favor of the market’s positive side, the main index of Tehran Stock Exchange, TEDPIX, was spared further collapse as share prices could fall the most by 2% per day.

As expected, the decision failed to prop up the market and only delayed the market correction while also prolonging the downturn. Poor market conditions exacerbated as the ill-timed move undermined the liquidity of shares.

In April the SEO increased the limit down price to -3% to ease sell side pressure but that too was futile, compelling the regulator to find other ways out of the ending crisis.

Riding on the back of the liquidity tsunami in the market, the TEDPIX jumped 300% in less than five months and crossed the historic high of 2.1 million points in August.

Triggered by institutional traders’ huge selloff, mostly shares of companies affiliated to the government, the market plunged and the TEDPIX crashed and lost half its value leaving millions of retail traders to fight their own battles.