The managing director of Iran Fara Bourse, the junior equity market in Tehran, says removing limits on daily share prices would be a boon for bourse.
Amir Hamouni told IRNA said eliminating the daily price spread will indeed be a positive move in restoring discipline to trade in the share market.
"Technically speaking, I defend removing limits on daily share prices. However, this must be subject to appropriate conditions and after investors are given enough time to analyze the shares," Hamouni said.
He welcomed the decision in mid-March by the High Council of Securities and Exchange, the top stock market policymaker, which agreed in principle to raise the daily price limits.
The council approved general policies with regard to change in the daily price spread based on which the daily price fluctuation limit is supposed to increase "gradually and when the market is prepared and investors are fully informed".
Increase in the price spread would be accompanied by promoting financial awareness and encouraging investors to invest indirectly, i.e. through asset managers and investment funds.
The bourse council did not specify the amount stock prices can fluctuate in a trading session and assigned the job to the Securities and Exchange Organization.
The SEO boss Ali Dehqan-Dehnavi earlier said the regulator would consult financial market experts to come to a final decision regarding the issue.
Pointing to an imminent increase in share price limits, Hamouni said he would support eliminating the daily price spread "if he is asked to choose between increasing price spread by 10% a day or scrapping it altogether.”
The daily price spread was ±5% during one trading session for years before the stock market regulator decided to increase the limit up price on Feb. 13 and decrease the limit down.
As per the decision, share prices ranged from -2% to +6% a day. The decision is still in force to avoid further decline in share prices and support millions of retail investors who have taken a big hit after the share market bubble burst last summer. Observers say such a move has not helped revive the market and only postponed the correction of share prices. It also unusually undermined liquidity of shares.
Riding on the back of fresh liquidity flooding the market, the main gauge of Tehran Stock Exchange, TEDPIX, jumped 300% in the first half of previous fiscal and crossed the historic high of 2.1 million points by mid-August. With investors in big numbers fleeing the market, the TEDPIX lost half its value and plunged to one million points.
Hamouni concurred that more than 1,200 trillion rials ($4.8 billion) in liquidity flowed out of the market in the first half of last year, saying that the market crashed after liquidity inflow came to an end.
