The Nigerian Stock Exchange (NSE) is commencing the implementation of its amended trading rules today. The new rules, which were approved by the Securities and Exchange Commission (SEC), specify the revised price limit, price movements and tick sizes i.e. price floor, minimum pricing increments and minimum quantity to be traded that will change the published price. The rules also classify equity securities into different price groups in order to achieve this. The amendments include that of Pricing Methodology and Par Value Rules, which can be found in Rules 15.29 and 15.30 respectively of the Rulebook of The Exchange 2015 (Dealing Members’ Rules).
The revised rule will be implemented on The Exchange’s trading engine on the effective date. “The amended stratification of price movements, price limits and tick sizes aims at improving liquidity, narrowing spreads, and ensuring that all prices improving (up/down) transactions are material, making the market more efficient for all participants”, said Mr. Abimbola Babalola, HoD Market Surveillance and Investigations Department.
In order to achieve the aforementioned aims of improved liquidity, narrowed spreads, material price improvements, and market efficiency, the amendments to the Pricing Methodology Rule included the introduction of a new price group – “Group C”.
The new Group “C” consists of equity securities that are priced below five naira (N5.00) per share, for at least four (4) of the last six (6) months, or new security listings that are priced below five naira (N5.00) per share at the time of listing on The Exchange. Market participants were also informed that the new Par Value Rule specifies that the price of every share listed on The Exchange shall be determined by the market forces and equities may now trade below the erstwhile price floor of 50 kobo (N0.50) per unit.
Therefore, traders are required to ensure that as from the above stated effective date, all open and subsequent priced orders in equity securities comply with the amended requirements for each price group of equities and in approved minimum increments accordingly. Investors have been advised to contact their stockbrokers to ascertain whether any of their open orders would be impacted by the amendment.