The board of directors of the Securities and Exchange Organization has decided to expand limit up and down of daily prices in the stock market by 1 percentage point.
Share prices can now range from minimum -7% to maximum +7% in one trading session, Securities and Exchange News Agency (SENA) reported.
The move was in line with the decision to improve liquidity of the stock market. The SEO earlier said that price spread at the Tehran Stock Exchange and the junior equities exchange Iran Fara Bourse market will increase up to ±10% by end of the current fiscal year in March 2023.
Policymakers reiterated that the increase in price range would be in phases, possibly on a quarterly basis, to avoid potential harmful effect on the market.
The decision to raise price spread to help lift the flagging bourse was first put into effect in April when the SEO decided to increase the daily price range by 1 percentage point to ±6.
Up until then, share prices could move between -5% and +5% in each trading session -- a process that existed for years.
Price spread will increase only for stocks traded in “prime markets” of TSE and IFB, which includes major companies and blue chips with the highest financial and accounting standards.
The daily price limitation is still ±5 for low-status listed companies unable to meet the required financial transparency norms.
Stock market officials say the price spread could expand again in the coming months. According to Peyman Haddadi, caretaker of SEO’s Supervision Department, the SEO will decide to raise or not raise the price spread at the end of autumn after another review of the market and listed companies.
He hailed the decision to increase the price spread as “a right move that should help improve liquidity of shares”.
The proposal to expand daily price limits was first mooted after mounting calls from many quarters, urging the capital market authorities to expand the range.
Observers argue that limiting the daily price fluctuation is not in the interest of the share market. Due to its harmful impact on market sentiment and liquidity of stocks, experts now say that changes in daily price spread is a must.
Earlier, the SEO chief Majid Eshqi said limiting the price spread is an interventionist practice and disrupts the balance of demand-supply mechanism—the integral component of the bourse.
The decision is also supported by the High Council of Securities and Exchange, the top stock market policymaker.
