SEO Says Determined to Expand Price Spread in Share Market

EghtesadOnline: Head of the Securities and Exchange Organization says the regulator is steadfast in wanting to expand the daily price spread in the share market.

News ID: ۷۸۶۷۵۴

28 July 2021

“I have always believed that the price spread must expand. The present daily limit will certainly change,” Mohammad Ali Dehqan-Dehnavi said in talk with IRNA on Tuesday.

According to the official, the feasibility studies have been undertaken by the research arm of the SEO. “Any decision in this regard must [and will be] geared to ensuring stability in the bourse.”

What is important is “whether increasing the price limit to ± 10% or ±15% can pave the way for a balanced share market and improve efficiency?,” Dehqan-Dehnavi said.

To avoid volatility in the stock market price spread will increase in phases, he stressed. “For example we can add 0.5 or 1 percentage point to the current price limit every month.”

The decision is backed by the High Council of Securities and Exchange, the main stock market policymaker. The council in mid-March gave conditional approval to raise the daily price limits.

As per the decision, the daily price fluctuation limit is supposed to increase if it is gradual and when the market is prepared and  investors are fully informed.

At present, share prices can go down -5% and rise +5% in each trading session. This range has existed for years. However, the regulator has made temporary changes in highly volatile market conditions.

Apparently to save the stock market from further decline and shield retail investors from the unrelenting sell-off in the last fiscal year that ended in March, the SEO decided to increase the limit up price and decrease the limit down.

In February share prices could move in the -2% to +6% bracket a day.  As anticipated, that SEO move failed to prop up the market, delayed the correction phase and prolonged the downturn. The downward spiral in the market continued and further undermined the liquidity of shares.

Later 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 a better and workable solution to the crisis.

Iran’s stock market plunged last summer, triggered by institutional traders’ huge selloff, mostly in shares of companies affiliated to the government.

The main index of Tehran Stock Exchange, TEDPIX, crashed and lost half its value, leaving millions of retail traders in the lurch. The market though has picked up slightly in recent weeks but the gains leave much to be desired amid high uncertainty and the yet unknown economic policy of the new government.