The Securities and Exchange Organization said the daily price band in the share market will increase by 1% from Monday.
The Tehran Stock Exchange and the junior equity Exchange Iran Fara Bourse announced the change in separate notices, the SEO News Agency reported.
At present, share prices can go down -5% and rise +5% in each trading session – a daily range that existed for years. With new changes becoming effective on April 18, the limit down of prices will be -6% and limit up +6%.
Mehdi Parchini, head of the SEO supervision department, said the SEO has delved into the issue for long before it was approved by the board.
“Expanding the daily price spread is a long-pending demand of investors,” he said, expressing the hope that it would help improve the liquidity of shares.
Market observers, however, say limiting the daily price fluctuation does little to help the bourse. Due to its harmful impact on market sentiment and liquidity of stocks, share market experts and authorities decided recently that changes in daily price spread now is a compulsion not convenience.
Parchini didn’t comment on whether the regulator plans to further expand the limits in the future. However, capital market authorities have noted that increasing the daily price range will be gradual process to avoid any potential harmful effect on the market.
SEO vice-chairman Mohsen Khodabakhsh earlier said that price spread at Tehran’s stock market will increase up to ±10% by end of the current fiscal year in March 2023.
“The increase will be in phases until it reaches 10%. Plans call for adding 1 percentage point in each phase of the price spread,” he was quoted as saying by IRNA.
Intervention Censured
In related news, SEO managing director Majid Eshqi has said that limiting the price spread is an interventionist practice and disrupts the demand-supply mechanism.
The latest price spread decision has the backing of the High Council of Securities and Exchange, the top stock market policymaker.
The regulator recently made temporary changes to help lift the highly volatile market. To help spare the stock market further pain and protect retail investors from unrelenting selloff last year, the SEO decided to increase the limit up price and decrease the limit down.
As per this decision in February 2021, share prices move from -2% to +6% a day. As anticipated, this decision failed to prop up the bourse and delayed market correction only to prolong its decline. Poor market conditions exacerbated as the ill-planned move worked to further undermine liquidity of shares.
Later in April, the SEO increased the limit down price to -3% to try and ease sell-side pressure as investors were fleeing the market in droves.
But this too was an exercise in futility forcing the regulator to find other ways out of the crisis. Failing to shore up the market, the regulator later decided that the daily price range return to the conventional -5%-+5%.
