The managing director of Iran Fara Bourse, the junior equity exchange, says abrupt expansion of daily price spread in the stock market is not a wanted approach.
“We are neither in favor of such expansion of price spread nor eliminating it entirely. We believe the price spread must increase in phases,” Meisam Fadaee said in an interview with EcoIran Web TV, the Financial Tribune's sister media outlet.
Due to its harmful effect on market sentiment and liquidity of stocks, bourse experts and authorities have reached a consensus that changes in daily price spread is now a must.
Earlier Majid Eshqi, head of the Securities and Exchange Organization, said limiting the price spread is an interventionist practice that disrupts the balance of demand-supply mechanism — an integral component of the stock market.
At present, share prices can go down -5% and rise +5% in each trading session. This range has existed for years. However, the regulator recently made temporary changes to the highly volatile market conditions.
In a bid to salvage the market from further turmoil and help protect retail investors from unrelenting sell-off last year, the SEO decided to increase the limit up price and decrease the limit down.
The regulator allowed share prices to range from -2% to +6% a day. As anticipated, that move failed to prop up the market and only delayed the market correction prolonging the downturn. The SEO then decided the daily price range to return to the conventional -5% to +5%.
