The floor and ceiling of share prices can increase by up to ±12% for a particular ticker on the request of market makers, said the market operation head at the Securities and Exchange Organization.
Citing new instructions from the SEO, Mehdi Zamani said not all market makers have such permission.
“First they must be approved by the regulator. Eligible market making companies must meet specific requirements,” he told state TV, the IRIB news website reported.
For example, their performance over three months with regard to a particular ticker is examined. Likewise, they will have met their market making obligations in 70% of the trading sessions.
Market makers essentially act as wholesalers by buying and selling securities to balance the market—the prices they set reflect market supply and demand.
Market makers help keep the market functioning, that is if investors want to sell a particular security, they are there to buy. Similarly, if they want to buy a stock, they have to make that stock available.
Zamani was speaking after the SEO announced new procedures based on which the daily price range in the share market increased by 1 percentage point to ±6 on Monday.
Up until now, share prices could go down -5% and rise +5% in each trading session, a pattern that existed for years.
The decision came after mounting calls from many quarters, asking capital market authorities to expand the price range in the long struggling share market.
Observers argue that limiting the daily price fluctuation dos little to benefit the bourse. Due to its harmful impact on market sentiment and liquidity of stocks, stock market experts and authorities alike came to the conclusion that changes in daily price spread is now a must.
Decision-makers at the SEO have stressed that increasing the daily price range would be in phases to avoid the potential harmful effect on the market.
The vice-chairman of SEO, Mohsen Khodabakhsh, earlier said that price spread in Tehran’s stock market will increase up to ±10% by end of the current fiscal year in March 2023.
