Karachi: To prevent price manipulation and step up free float in the bourse, the Pakistan Stock Exchange (PSX) is considering launching a separate counter for trading of less liquid stocks.
As per a document, less liquid stock status will be assigned to equity stock if it falls below the limit of free-float, average daily traded value, number of days traded as per proscribed rules of PSX.
According to experts, this move by the PSX is being facilitated for rise in share float which would enable higher overall volume of trade, curb manipulation and ensure better price discovery at the bourse.
According to this proposal, less liquid stocks will be omitted from the list if it meets regulations relating to dividend payouts, market capitalization and profitability.
Only those companies will qualify for trading in less liquid stocks, who have eligible unique identification numbers (UIN) prescribed under the regulations of National Clearing Company of Pakistan Limited (NCCPL).
Ineligible UIN’s will also be allowed to participate in the selling of less liquid stocks. In regard to trading of less liquid stocks, period call auction sessions suggestion has been put forth.
PSX will check and review listed equity stocks every three months depending on availability of data, which would be used to prepare a list of stocks at start of each new quarter. These stocks then would be traded in the less liquid counter in the upcoming quarter in the ready delivery contract market.
Closing price of the stock traded in less liquid section will be subject to basis of volume weighted average price during the last call auction session.
Price volatility and impact cost is considered to be higher for illiquid stocks of such a nature, the document revealed.
