The securities regulator has further imposed floor prices to contain free fall of listed securities after the key index dropped below 6000-point mark on Thursday amid investors' lower participations.
In an order issued on Thursday, the Bangladesh Securities and Exchange Commission (BSEC) set floor prices for all listed securities taking into account their average closing prices of five sessions executed since Sunday to Thursday.
As a result, the floor price of a listed security shall be the average of the closing price of Thursday (July 28, 2022) and the closing prices immediate preceding four sessions.
The normal 10 per cent limit will remain effect in upper end but in no way the market prices of the listed securities will be allowed to go below their respective floor prices.
The BSEC officials said the recent sharp correction in both key index and turnover value prompted further introduction of floor prices.
Following the recent sharp corrections, DSEX, broad index of Dhaka Stock Exchange (DSE), on Thursday went down below 6000 points and closed at 5980.51.
On Sunday, the opening prices of the listed securities will be the average of the closing prices of five sessions in executed in last week, according to the BSEC's Thursday's directive.
In its directive, the securities regulator has said the decision regarding setting floor prices has been taken for the interest of investors and the securities market under the post covid and recent global economic situation.
"Apart from post covid situation, Ukraine-Russia war created a panic among investors. That's why, the BSEC has imposed floor prices on temporary basis to restore investors' confidence," said Mohammad Rezaul Karim, a BSEC executive director and spokesperson.
For example, the market price of a listed security closed at Tk 100 each on Thursday and the closing prices of this security were Tk 102, Tk 104, Tk 101 and 103 for immediate four preceding sessions.
Then the average price for these five sessions will stand at Tk 102 and this price will be considered as floor price of the security.
And this price will also be considered as the lower limit of the circuit breaker meaning the market price of the security will not be allowed to go down below Tk 102.
The normal 10 per cent limit will remain effective in both upper end and lower end of the circuit breaker if the security is traded above the floor price.
For example, the market price of the security having floor price worth Tk 102 closed at Tk 110 in one of the sessions after July 28, 2022.
In the following session, the market price of the security can go up to 10 per cent but a 10 per cent decline will not be allowed in lower end as taking into 10 per cent limit the price will stand at Tk 99 which is lower than the floor price of Tk 102.
In that case, the lower limit of the circuit breaker will be 7.27 per cent and the security will be traded at floor price if there are buyers.
In case of corporate actions relating to dilution effect, the floor price of a listed security shall be adjusted or diluted market price of reference price of floor price on immediate prior record date on the basis of declared corporate actions relating to stock dividend or rights issue.
The floor price for the newly listed security shall be reference price for the closing price of the first trading session, the BSEC directive said.
Earlier, the securities regulator set floor prices on all listed securities on March 19 of 2020 calculating their average prices of preceding five days to arrest the fall of index following the outbreak of the covid pandemic.
Later, the securities regulator lifted floor prices in three stages amid experts' criticisms and demand of foreign investors.
Afterwards, the securities regulator again imposed 2.0 per cent circuit breaker on May 25, 2022.
