New price methodology rules takes off Monday on NSE

The Nigerian Stock Exchange (NSE) has announced that the amendments to Pricing Methodology and Par Value Rules, which can be found in Rules 15.29 and 15.30 respectively of the Rulebook of The Exchange 2015 (Dealing Members’ Rules) which have been approved by the Securities and Exchange Commission (SEC) wil become effective on Monday, 29 January, 2018.

According from a press statement by the Exchange, traders are required to ensure that as from Monday, January 29, 2018 the effective date of the new pricing methodology rule, all open and subsequent priced orders in equity securities comply with the amended requirements for each price group of equities and in approved minimum increments accordingly.

“Investors are advised to contact their Stockbrokers to ascertain whether any of their open orders, will be impacted by this amendment” the exchange advised.

“The Rules specify the revised price limit, price movements and tick sizes i.e. price floor, minimum pricing increments and minimum quantity to be traded that will change the published price.

“The Rules also classify equity securities into different price groups in order to achieve this, the revised Rules, the exchange states, will be implemented on The Exchange’s trading engine on the effective date.

“The amended stratification of price movements, price limits and tick sizes aims at improving liquidity, narrowing spreads, and ensuring that all price improving (up/down) transactions are material, making the market more efficient for all participants”, said Mr. Abimbola Babalola, HoD Market Surveillance and Investigations Department.

“In order to achieve the aforementioned aims of improved liquidity, narrowed spreads, material price improvements, and market efficiency, the amendments to the Pricing Methodology Rule included the introduction of a new price group – “Group C”.

“It should be noted that the new Group “C” consists of equity securities that are priced below Five Naira (N5.00) per share, for at least four (4) of the last six (6) months, or new security listings that are priced below Five Naira (N5.00) per share at the time of listing on The Exchange.

“Group A, required 10,000 units to move price by N10. For the price range trading period, equities in this group require N100.00 or above ,for 4 of the last 6 months, or new security listings priced at N100.00 or above at the time of listing.

“For group B requires minimum of 50,000 units to move price by N0.05 and for price range trading period, N5.00 or above but lower than N100,for 4 of the last 6 months, or new security listings priced at N5.00 or above but lower than N100 at the time of listing.

“While the group C, would require 100,000 units of shares to move price by N0.01, Equities in this category must have traded Lower than N5,for 4 of the last 6 months, or new security listings priced lower than N5 at the time of listing.

“Market participants are also informed that the new Par Value Rule specifies that the price of every share listed on The Exchange shall be determined by the market forces and equities may now trade below the erstwhile price floor of fifty Kobo (N0.50) per unit.

“Therefore, traders are required to ensure that as from the above stated effective date, all open and subsequent priced orders in equity securities comply with the amended requirements for each price Group of equities and in approved minimum increments accordingly.

“Investors are advised to contact their Stockbrokers to ascertain whether any of their open orders, will be impacted by this amendment”.