The new circuit breaker regulations would be effective immediately, said an office order of the Bangladesh Securities and Exchange Commission, issued on the day
The stock market regulator on Thursday asked two bourses to put 50% circuit breaker on share prices of newly listed companies for the opening two days to prevent their abnormal price movement.
The new circuit breaker regulations would be effective immediately, said an office order of the Bangladesh Securities and Exchange Commission, issued on the day.
The latest decision would help investors and stock market, said the order.
According to the BSEC order, on the first trading session, a 50% circuit breaker will be imposed on the issue price of the debutant company’s shares.
On the second trading session, the circuit breaker of 50% will be imposed on the reference price or first day’s closing price or on the adjusted open price. Circuit breaker regulation will be as usual, or 10% from the third trading session, adds the order.
Earlier, on November 5, the decision in this regard was made in the BSEC Commission meeting, presided over by Commission Chairman M Khairul Hossain.
Stakeholders of share market including representatives DSE and Dhaka Stock Exchange Brokers' Association (DBA) in a recent meeting with the BSEC demanded a number of reforms to ensure quality IPOs in the stock market.
They also said in the opening day of trading some companies’ prices typically increase as high as 200%-400%.
Asked about the issue, DBA president Shakeel Rizvi welcomed the securities regulator’s decision.
“The cap on first few days on share price is a good initiative which should have been taken long ago. Cashing in the abnormal price hike of IPOs in opening days, a vested quarter take advantage leaving other general investors to suffer,” he told Dhaka Tribune.
During the eight-year tenure of incumbent BSEC Chairman M Khairul Hossain, around 86 IPOs were approved, while around half of them were alleged to be of low qualities.
Market insiders alleged that a large number of low performing firms often showed higher profitability in their financial statements while applying for IPO approvals.
After listing, it was found that the earning per share (EPS) of most of the firms started falling, suggesting that their earlier earning reports were either overestimated, or fake, they said.
Besides, the premier bourse last week formed a six-member committee to review the prospectus of IPO-seeking companies before their listing with bourses.