Thai model mulled in place of SEC’s price band
By Indika Sakalasooriya
A system prevailing on the Thai bourse is being proposed to curb excessive manipulation at the stock market here, a Securities and Exchange Commission (SEC) source told The Bottom Line.
His remarks came amid the commission’s indecisiveness over the 10 percent price band issue.
Suggestions have been made to adopt the Thai stock market (SET) model to curb excessive manipulation if the price band is lifted in the near future, the SEC source explained.
“The price band would go but it won’t just go. If it is to go, a proper monitoring system should be in place. So, we are contemplating several models we could adopt and Thai model is one of them,” the source said.
As he further pointed out, the Thai model imposes price bands only on selected shares which look too vulnerable due to possible manipulative attempts. The SET model does not place price bands across the board.
According to the literature available on the Internet, SET imposed a 10 percent price band during the early part of 1990s to curb excessive manipulation even though it hurt the vibrancy of the market to some extent. But they introduced a set of new floor and ceiling price limits in 1997, letting a stock to fluctuate with a range of 30 percent of the previous closing price.
Along with these new measures, SET also introduced circuit-breakers to ease any unusual volatility in the market that may cause investor panic.
His remarks came amid the commission’s indecisiveness over the 10 percent price band issue.
Suggestions have been made to adopt the Thai stock market (SET) model to curb excessive manipulation if the price band is lifted in the near future, the SEC source explained.
“The price band would go but it won’t just go. If it is to go, a proper monitoring system should be in place. So, we are contemplating several models we could adopt and Thai model is one of them,” the source said.
As he further pointed out, the Thai model imposes price bands only on selected shares which look too vulnerable due to possible manipulative attempts. The SET model does not place price bands across the board.
According to the literature available on the Internet, SET imposed a 10 percent price band during the early part of 1990s to curb excessive manipulation even though it hurt the vibrancy of the market to some extent. But they introduced a set of new floor and ceiling price limits in 1997, letting a stock to fluctuate with a range of 30 percent of the previous closing price.
Along with these new measures, SET also introduced circuit-breakers to ease any unusual volatility in the market that may cause investor panic.
However, TBL’s attempt to get an official confirmation on the matter was fruitless as senior SEC officials maintained a tight-lip policy over the price band issue.
SEC Deputy Director-General Malik Cader, while confirming that a final decision had not yet been reached on the price band, refused to comment on the possible adoption of the Thai-market model saying that “nothing of that sort was suggested during the commissioners’ meeting held last week”.
The 10 percent price band, which was imposed by the SEC a few weeks ago, has been subjected to a lot of criticism - for and against.
The key argument against the price band was that it could kill a day’s trading, an aspect according to many, a market should facilitate.
The Colombo bourse dipped immediately after the imposition of the price band, but rebounded a few days later, pushing the investor community’s hopes up - though the sentiments are not fully recovered yet.
SEC Deputy Director-General Malik Cader, while confirming that a final decision had not yet been reached on the price band, refused to comment on the possible adoption of the Thai-market model saying that “nothing of that sort was suggested during the commissioners’ meeting held last week”.
The 10 percent price band, which was imposed by the SEC a few weeks ago, has been subjected to a lot of criticism - for and against.
The key argument against the price band was that it could kill a day’s trading, an aspect according to many, a market should facilitate.
The Colombo bourse dipped immediately after the imposition of the price band, but rebounded a few days later, pushing the investor community’s hopes up - though the sentiments are not fully recovered yet.
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