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NSE spreads rule finally takes effect

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Capital Markets

An investor at NSE
An investor at NSE. FILE PHOTO | NMG 

The new share price movement spreads announced by the bourse last month finally took effect Monday after the configuration of the automated trading system to incorporate the changes.

The Nairobi Securities Exchange (NSE) #ticker:NSE on October 24 made the changes to narrow the price movement spreads (margins), which stipulate the value at which a stock moves up or down in trading between bids, subject to a maximum of 10 percent on the previous day closing price.

The changes were made primarily to improve the liquidity in the market and allow shares that are trading in cents to trade without falling foul of the daily 10 percent limit, which would prove impossible once a share fell below 50 cent under the previous rules.

“We wish to advise that the ATS system has been configured to support the revised spreads and the changes will take effect from Monday, 26th November 2018,” said the NSE in an alert Thursday.

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Shares that are priced below Sh5 are now advancing or retreating in price in spreads of one cent from the previous five cents.

Counters priced between Sh5 and Sh10 will enjoy a spread of two cents, while those shares trading at between Sh10 and Sh50 will enjoy a bidding spread of five cents.

Under the previous rules, stocks trading below Sh20 had a spread of five cents, with those trading at between Sh20 and Sh50 moving up or down in lots of 25 cents.

While in the previous rules stocks priced above Sh100 could only move by a minimum of Sh1, they have now been desegregated where those trading between Sh50 and Sh500 have a spread of 25 cents, those between Sh500 and Sh1,000 have a spread of Sh1, while those above Sh1,000 move incrementally by Sh5.

In yesterday’s trading, Kenya Power #ticker:KPLC touched a high of Sh3.69, with an opening price ofSh3.50. A movement of 19 cents was only possible because of the revision of spreads for shares in that price category from five cents to one cent.

Standard Chartered also saw trades at Sh188.50, which would not have been possible under the previous rules.

The changes have, however, gone live too late to help the shareholders of Deacons Limited, who were stranded at a price of Sh0.45 due to the previous rules. The stock was suspended from trading last week after the firm went into administration due to financial difficulties.

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