29 January 2018

Nigeria: NSE Introduces New Pricing, Par Value Rules

The Nigerian Stock Exchange (NSE) has introduced a new pricing methodology and par value rule, which have been approved by the Securities and Exchange Commission (SEC).

The rules, which became effective today (Monday, January 29), specified the revised price limit, price movements and tick sizes that the 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 the pricing methodology.

Head, Market Surveillance and Investigations Department, NSE, Mr. Abimbola Babalola said: "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."

According to him, 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 N5.00 per share, for at least four of the last six months, or new security listings that are priced below N5.00 per share at the time of listing on the NSE," he added.

The minimum pricing increments and minimum quantity traded for equity securities will no longer be the one-size-fits-all of One Kobo (N0.01k) which has been used in the market for all equity securities.

According to the new rule, a trade of at 10, 000 units, is required to move the price of equities trading at N100 or above (Group A) by 10kobo. A trade of at least 50,000 units is required to move the price of equities trading at N5 or above but lower than N100 (Group B) by five kobo, while a trade of at least 100,000 units shall be required to move the price of equities trading at N0.01k or higher but below N5 (Group C) by one kobo.

Meanwhile, 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.

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