Tick size cut to keep ‘penny stocks’ tradable

With some stocks trading around Tk 1 per share, the prime bourse has reduced the smallest allowable price deviation in each transaction for such securities to Tk 0.01 from the existing Tk 0.10.

The decision will come into effect on October 29, according to a stock exchange filing on Sunday, aimed at ensuring smoother price discovery and improved market efficiency.

The smallest fraction by which a stock can move up or down on the exchange per trade is called the tick size.

"When the price of any security falls below Tk 1, the existing tick size of Tk 0.10 becomes unsuitable for price movement and trading purposes," said the DSE in the announcement.

Requesting anonymity, a DSE official said the decision had been prompted by the stock of scam-hit Peoples Leasing & Financial Services falling to Tk 0.90 a share.

This is the lowest-ever stock price in Bangladesh's capital market history. Peoples Leasing is the first ‘penny stock’ that risks remaining frozen if the tick size does not change. The stock price of another troubled company - Fareast Finance & Investment - also dropped below Tk 1 to close at Tk 0.90 per share on the Dhaka Stock Exchange (DSE) on Sunday.

The reduced tick size will facilitate trading in the stocks of Peoples Leasing & Financial Services and Fareast Finance & Investment.

Three other scam-hit non-bank financial institutions - International Leasing and Financial Services, FAS Finance & Investment, and Premier Leasing & Finance - closed at Tk 1, Tk 1.10, and Tk 1.10 per share respectively on Sunday on the DSE.

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