The Exchange is proposing an amendments to Rule 15.29: Pricing Methodology, Rulebook of The Exchange, 2015 (Dealing Members’ Rules).
According to The Exchange, “Rule 15.29 currently prescribes the process by which the prices of equity securities may be determined, and the minimum price movement for equity securities listed on The Exchange. Rule 15.29(a), states that “[s]ecurities shall trade in price increments of one (1) Kobo.” This is a “one size-fits-all” price movement or tick size for all equity securities. A tick size is the minimum price movement by which the price of a trading instrument can change.”
“Empirically, a very small “one size-fits-all” tick size can increase the risk of undue advantage for front runners, as well as other erroneous trading practices. In such instances, the liquidity providers, e.g., Market Makers and Institutional investors may be reluctant to submit limit orders, leading to a thin order book.”
“It is global best practice for exchanges to set price movements for securities in a manner which simplifies trading and promotes liquidity. The role played by price movements in every market structure, and its particular influence on the liquidity and trading momentum cannot be overemphasised.”
The Exchange is seeking inputs from stakeholders. See attached details of the proposed amendments.
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