The Barbados Stock Exchange is shaking-up the way shares are sold and bought in Barbados following months of complaints by listed companies and investors.
BSE General Manager, Marlon Yarde, announced this afternoon that effective the beginning of next month, a series of measures, including the abandonment of an Odd-Lot market, would be introduced to halt the protracted trading of securities below market prices.
He was speaking at the BSE’s Belleville, St. Michael office where finance and investment firm Royalty Fidelity listed two funds for public trading today.
Yarde said as part of efforts “in improving the efficiency of our market”, his organisation had concluded changes to the stock market’s pricing methodology, something approved by the BSE’s board of directors of the BSE at a meeting held on August 23, and discussed with issuers and regulators.
“There will no longer be an Odd-Lot Market. There will be one market with each equity security listed having its own number of units/shares to be traded at any one time that would trigger a change of price on the board of the BSE,” he said.
“There will be an upper limit of 10,000 units and a lower limit of 100 units. There will be no aggregation of units in a trading day to achieve the number of units required to change the price at the end of the trading day.”
Yarde said BSE officials were responding to numerous concerns expressed by listed companies and investors alike, “about the manner in which trades of quantities of shares, at prices far lower than the market price, at or marginally above the current Odd-Lot limit of 1,000 shares, have drastically impacted the final price and total tradable value of a publicly traded company on any given day at the close of trading”.
“A study was commissioned to analyze this anomaly as well as examine trends in the market place regarding the use of Odd-Lot Limits by Exchanges both of similar size as the BSE and larger, more established Exchanges across the globe,” he noted.
“In the first instance, while we are not in a position to state exactly why these transactions occur at lesser prices, our investigations have revealed that some persons have been liquidating their assets to service more immediate financial obligations,” he said.
“It must be understood that the BSE is in no position to dictate what prices investors should or should not ask or bid for securities. It is obligated, however, to protect the interest of all market participants and it is our belief that the measures outlined above will aid in ensuring the stability of our stock market.
“To this end, we have established a set of trading limits (volumes traded) for each security that, if met or exceeded, will trigger a change in the price of that security. These limits were derived by analyzing both the market capitalization of each security and their respective average daily trading volumes,” Yarde added.(SC)