FE Report (January 13, 2011)
Securities and Exchange Commission (SEC) has initiated a move to introduce circuit breaker on the capital market index in a bid to prevent unusual fluctuation in the market.
"We are considering introduction of circuit breaker on the capital market index to avert abnormal ups and downs in the capital market," the Securities and Exchange Commission (SEC) Chairman Ziaul Huq Khondoker said.
SEC's move came in the backdrop of recent unusual fluctuation of market index.
But the SEC's move has drawn mixed reactions among the experts and the market insiders. Some have welcomed the move while others said it would not properly reflect the market scenario.
Circuit breaker system on index practised by so many leading sock markets, allows trading to halt at a certain point for certain period of time. The circuit breaker provides a trader the opportunity to rethink on buy-sell activities. At present Dhaka Stock Exchange (DSE) uses circuit breaker only in particular scripts.
President of DSE Shakil Rizvi said introduction of circuit breaker on overall index seems to be a good initiative in the context of current market situation. During the trading hour investors sometimes are carried away by event of the moment. If trading activities are suspended for certain period it will give investors chance for second thought in an overheated or in bearish market.
Experts also said the recent volatility in the market showed why sometime intervention from regulator is necessary to take control over the market. Circuit breaker could be a systematic tool in case of unusual behaviour of the investor.
Moin Al Kashem, Managing Director of Prime Finance Asset Management Company said, Bangladesh capital market is still immature. Some people buy and sell shares without having any fundamental knowledge. In this context introducing circuit breaker is quite relevant.
He said through the introduction of circuit breaker investors might have the chance to rethink and not be guided by the rumours which sometimes control the decision of the investors.
Yaweer Saeed, a market analyst, holds different view. According to him introducing circuit breaker is not the permanent solution in the current volatility of the market. Government and regulator should find out the main reason for the volatility prevailing in the market.
He said, introduction of circuit breaker may not give the proper reflection of a stock market. In advance stock market, authority imposes circuit breaker limit, to stop trading for sometime, to find out the reason behind the unusual behaviours in a particular day. If regulators of Bangladesh stock market can find out the reason behind the unusual rise or fall, then introduction of circuit breaker could be successful.
On Tuesday the Dhaka Stock Exchange's major index DGEN saw an unprecedented rise of 1012.65 points in the index. On the day 180 scripts touched the circuit breaker limit. Experts believe had there been no circuit breaker in the individual script price the index might have crossed 2000 points on Tuesday. They believe rise of index by 1012.65 points is in no way a good sign for a mature stock market.
Securities and Exchange Commission (SEC) has initiated a move to introduce circuit breaker on the capital market index in a bid to prevent unusual fluctuation in the market.
"We are considering introduction of circuit breaker on the capital market index to avert abnormal ups and downs in the capital market," the Securities and Exchange Commission (SEC) Chairman Ziaul Huq Khondoker said.
SEC's move came in the backdrop of recent unusual fluctuation of market index.
But the SEC's move has drawn mixed reactions among the experts and the market insiders. Some have welcomed the move while others said it would not properly reflect the market scenario.
Circuit breaker system on index practised by so many leading sock markets, allows trading to halt at a certain point for certain period of time. The circuit breaker provides a trader the opportunity to rethink on buy-sell activities. At present Dhaka Stock Exchange (DSE) uses circuit breaker only in particular scripts.
President of DSE Shakil Rizvi said introduction of circuit breaker on overall index seems to be a good initiative in the context of current market situation. During the trading hour investors sometimes are carried away by event of the moment. If trading activities are suspended for certain period it will give investors chance for second thought in an overheated or in bearish market.
Experts also said the recent volatility in the market showed why sometime intervention from regulator is necessary to take control over the market. Circuit breaker could be a systematic tool in case of unusual behaviour of the investor.
Moin Al Kashem, Managing Director of Prime Finance Asset Management Company said, Bangladesh capital market is still immature. Some people buy and sell shares without having any fundamental knowledge. In this context introducing circuit breaker is quite relevant.
He said through the introduction of circuit breaker investors might have the chance to rethink and not be guided by the rumours which sometimes control the decision of the investors.
Yaweer Saeed, a market analyst, holds different view. According to him introducing circuit breaker is not the permanent solution in the current volatility of the market. Government and regulator should find out the main reason for the volatility prevailing in the market.
He said, introduction of circuit breaker may not give the proper reflection of a stock market. In advance stock market, authority imposes circuit breaker limit, to stop trading for sometime, to find out the reason behind the unusual behaviours in a particular day. If regulators of Bangladesh stock market can find out the reason behind the unusual rise or fall, then introduction of circuit breaker could be successful.
On Tuesday the Dhaka Stock Exchange's major index DGEN saw an unprecedented rise of 1012.65 points in the index. On the day 180 scripts touched the circuit breaker limit. Experts believe had there been no circuit breaker in the individual script price the index might have crossed 2000 points on Tuesday. They believe rise of index by 1012.65 points is in no way a good sign for a mature stock market.
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