Price spread at Tehran’s stock market will be adjusted ±10% starting from the next fiscal year on March 21, said the vice-chairman of board of directors of the Securities and Exchange Organization (SEO).
Mohsen Khodabakhsh told IRNA the increase will be on a “phased basis” until it reaches 10% before March 2023.
“The plan is to add 1 percentage point in each phase of the bid-ask spread,” he said, denying the possibility of tweaking the daily price range in the remaining few days before the Iranian year ends.
Due to its harmful impact on investor sentiment and liquidity of stocks, market experts and relevant authorities have come to the conclusion that changes to the daily bid-ask spread is a must for the bourse that is in dire straits since the summer of 2020.
At present share prices can go down -5% and/or rise +5% in each trading session.
Khodabakhsh rejected the likelihood of eliminating daily price spread in its entirety or raising it to higher levels. “As long as the economy remains unpredictable, no one should expect the price spread to vacillate by 20% or 30%.”
Because neophytes and unprofessional investors are in the majority in the Iranian share market, Khodabakhsh said that the bourse regulator has reservations vis-à-vis expanding the price range(s).
Majid Eshqi, head of the SEO, confirmed to the press on Wednesday plans to expand daily price spread but stressed that such measures demand stable market conditions.
He opined that limiting the price spread is an interventionist practice with the potential of upset the demand-supply mechanism — an integral component of the share market.
The ±5 price range has existed for years. However, the regulator recently made some temporary changes to lift the volatile market. To save the bourse from further failure and help protect retail investors from unrelenting sell-off, the SEO last year increased the limit up price and cut the limit down.
The regulator allowed share prices to move between -2% to +6% a day. As anticipated, that too failed to prop up the market and only delayed market correction prolonging the downturn. Late the SEO was compelled to return to the conventional -5%-+5%.
The decision was in line with policy set by the High Council of Securities and Exchange. The council in June approved the general policies for the daily price spread based on which the fluctuation limit can increase "gradually and when the market is prepared and investors are fully informed".
