Circuit Breaker Redesigned

FE Report (January 25, 2011)

The stockmarket regulator has revised the disputed circuit breaker system which controls the prices of individual shares from going up or down by a certain limit.

The upward or downward price-limits on individual securities were reduced to half in an effort to check any abnormal rise or fall in share prices on a single trading day.

The new limits, decided by the Securities and Exchange Commission, will be effective from today, as the markets resume.

Also, SEC decided not to cancel or postpone the initial public offerings of Mobil Jamuna Lubricants Bangladesh and MI Cement Factory that are using the book building method suspended by the government.

In consultation with the government, the regulator took the decision yesterday, as sponsor directors of the companies promised to buy the shares back, if the prices go below offer prices within the first 30 days after listing.

Earlier, the twin IPOs attracted criticism from market experts, analysts and stakeholders, who said the companies inflated their IPO prospectus figures and made the indicative prices higher.

According to the revised circuit breaker system, a share worth up to Tk 200 cannot rise or fall by 10 percent (not exceeding Tk 17.5) on a single day, which was earlier 20 percent (not exceeding Tk 35).

For shares ranging between Tk 201 and Tk 500, prices cannot go up or down by 8.75 percent or Tk 37.50, instead of 17.50 percent or Tk 75.

The limit is 7.5 percent or Tk 112.50 for shares with prices between Tk 501 and Tk 1,000, which previously was 15 percent or Tk 125.

Stocks with prices ranging between Tk 1,001 and Tk 2,000 cannot increase or decrease by 6.25 percent or Tk 100, as against previous 12.5 percent or Tk 200.

The price cannot rise or fall by 5 percent or Tk 187.50, instead of 10 percent or Tk 375, if share value ranges between Tk 2,001 and

Tk 5,000.

The limit is 3.75 percent or Tk 300 for shares worth Tk 5,001 and above, which previously was 7.5 percent or Tk 600.