According to data gathered from several market sources, the Nigerian Exchange (NGX) has implemented new regulations that will drastically affect how share prices move on the exchange by establishing minimum trading volume levels before prices may shift.
In due order, the exchange is also anticipated to communicate the effective date.
Price Movements:
The following minimum number of shares must be traded in order to alter an equity security's published price:
(A) Ten thousand (10,000) units in Group A.
(B) Group B: 50,000 units.
(C) Group C: One Hundred Thousand (100,000) units.”
According to the new regulations:
A minimum of 10,000 shares must be traded for stocks trading at N1,000 and more before a price movement can take place.
A minimum of 50,000 shares are needed to cause a price shift in stocks that are trading at N500 or less than N1,000.
A minimum of 100,000 shares are needed to affect the market price of stocks that are trading below N500.
The development is anticipated to have an impact on trading techniques, especially in equities where historically, very small volumes have been able to alter prices. It also represents a significant shift in the exchange's price discovery mechanism.
Nonetheless, some traders have already voiced worries that the higher limits would make less liquid stocks less responsive to price changes.
The strategy coincides with greater regulatory focus on price creation, liquidity, and market integrity as the Nigerian capital market continues to draw more institutional and retail involvement.
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