The final trading information for the Jamaican Stock market will show that Cable and Wireless did not trade on Friday, even as 264,000 units were put through at 37 cents per share. The trades were eventually cancelled.
At 37 cents, the price moved just over 15 percent, which is 0.20 cents from maximum of 36.80 cents possible. The stock exchange does not trade stocks in Jamaican dollars for fraction of a cent, do not round up the figures, in computing the 15 percent limitation. On Monday, the stock could not trade above 41 cents, which is 15 percent above Friday’s bid of 36 cents, even as there were investors prepared to buy above this level.
Later this month, could be as early as next week Monday, the 15 percent restriction will give way to a new regime of 30 percent in one day but in two tranches of 15 percent each, one hour apart. The rules will still permit the bid to exceed the closing price or the offer to fall below it at the close, thus permitting the stock to trade at more than 15 percent from the closing price, on the next day.
According to information from the Jamaica Stock Exchange, the new rule is as follows, “No stock should trade +/-15% from the close price or the effective close price at the opening of the market. The effective close price is determined whenever the closing bid is greater than the close price or whenever the closing ask is less than the close price. Use the closing bid as the effective close price, if the value is greater than the close price or use the closing ask as the effective close price, if the value is less than the close price. However, during the day if the Circuit Breaker is triggered for a security, the security will be halted for an hour to allow for the release, circulation and absorption of any relevant market news and a cool down period while investors consider their options. After the hour has passed the security will be released for trading and the new reference price, which is a simple average of the trigger price and the close price, will be used to determine the trade range for the remainder of the day. The price of the trade that triggered the Circuit Breaker should not be +/-15% outside of the original prescribed price band. The stock will not be allowed to trade +/- 15% of the new reference price.”
IC Insider spoke with the General Manager of the exchange who advises that the plan is to start as of Monday November 17th. But certain technical challenges with the trading platform could delay its implementation. Until the beginning of December.
The change came after investors were surveyed of the Stock exchange recently. The circuit breaker was implemented in the 1990s based on complaints by some investors about large swings in the price movements of some stocks, which was felt by some as manipulation of the market. The rule did not find favour with a number of the players in the market for several years.