The Securities and Exchange Organization of Iran plans to expand the limit of daily price spread in the stock market by at least 10%.
Majid Eshqi, the head of SEO, made the announcement and noted that there is no hurry to implement changes, SENA quoted him as saying.
"We believe that making changes to the market mechanism will disrupt activities, so we are taking our time to come up with correct decisions," he said.
Last September, the regulator decided to expand the limit of price fluctuations in the stock market by 1 percentage point.
Share prices can now range from a minimum -7% to a maximum +7% in one trading session. The move was in line with the decision to improve liquidity of the stock market.
SEO had earlier said that the price spread at the Tehran Stock Exchange and the junior equities exchange Iran Fara Bourse will increase by up to ±10% by the end of the current fiscal year in March 2023.
Policymakers reiterated that the rise in price range would be phased, possibly on a quarterly basis, to avoid any 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 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, which process 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, SEO will decide to raise or not raise the price spread 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”.
The proposal to expand daily price limits followed mounting calls from many quarters, urging the capital market authorities to expand the range.
Observers argue that limiting daily price fluctuations 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, Eshqi had declared that 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.
