Reining in stocks' free fall

BSEC sets 2.0pc circuit breaker at lower end

FE REPORT | Thursday, 26 May 2022

The securities regulator has again set a 2.0-percent circuit breaker at the lower end for prices of all listed securities to contain the ongoing free fall of stocks.

The Bangladesh Securities and Exchange Commission (BSEC) issued a directive on Wednesday, setting the 2.0-percent limit, reducing the previous limit of 5.0 per cent.

As a result, the price correction of all listed securities will be allowed up to 2.0 per cent of their closing prices of the previous session.

The regulatory move came against the backdrop of the persistent fall of the broad index - observed in the last 11 sessions.

The DSEX, broad index of the Dhaka Stock Exchange (DSE), declined in the last 10 of 11 sessions.

In the 11 sessions, the DSEX lost 511 points to close at 6,187.64 points on Wednesday.

However, the upper limit of the circuit breaker, set at 10 per cent, remains unchanged, according to the BSEC directive.

Mohammad Rezaul Karim, the BSEC spokesperson, said selling pressure increases, if the downward trend continues in the market.

"That's why the regulator has reduced the lower limit. Market operators also made pleas for taking some measures, such as introduction of floor price or reduction of lower limit of the circuit breaker," he added.

Earlier, the securities regulator reduced the lower limit to 2.0 per cent on March 8 to contain the market fall.

Later, the BSEC set the lower limit at 5.0 per cent on April 20, and finally the limit has been reduced to 2.0 per cent on Wednesday.

After the COVID-19 outbreak, the securities regulator introduced floor prices on March 19, 2020, and the prices of listed securities were not allowed to go down below their respective floor prices.

Later, the BSEC lifted floor prices of all listed securities on June 18, 2021, after the market returned to normalcy.

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