Mumbai: To prevent excessive volatility in shares, leading stock exchange BSE has introduced weekly, monthly, quarterly and yearly based price band framework for the securities exclusively listed on its platform.
So far, BSE had a daily price band mechanism -- maximum permissible limit, within which the share price can move in a day. The listed-securities are assigned a daily price band of either 20 percent, 10 percent, 5 percent or 2 percent based on the pre-decided joint criteria.
The new long duration price band framework, which is in addition to the daily price band mechanism, will apply to stocks "exclusively" listed and traded on BSE equity trading platform including SME and SME ITP platform.
"The new weekly, monthly, quarterly and annual price bands have been devised to contain volatility in the prices of stocks across long period which is expected to ensure improved price formation and better regulatory oversight," a BSE spokesperson told PTI.
"The improved long duration price band framework is also expected to help eliminate tax avoidance schemes that have come to light recently and also help eliminate price manipulation in Indian markets making them more robust over a longer period," he added.
Under the new framework, a security having daily price band of 20 percent can move upward or downward up to 60 per in a week. Whereas in a month it can move upward or downward up to 100 percent. It can move 200 percent or 400 percent on a quarterly and yearly-basis respectively.
Similarly, security with a daily price band of 10 percent can move 30 percent on weekly-basis, 60 percent on monthly-basis, 100 percent on quarterly-basis and 200 percent in a year.
A stock assigned a daily price band of 5 percent would be allowed a 20 percent (weekly), 30 percent (monthly), 60 percent (quarterly) and 100 percent (annually) movement.
Those with 2 percent band will have 10 percent band for the week, 20 percent for the month, 30 percent on quarterly basis and 50 percent movement annually.
Further, the exchange said a factor of 200 percent of BSE mid-cap index movement would be applied for taking into account the overall movement in the market to the monthly, quarterly and yearly price band limits.
This factor shall be added in the direction of the movement of the index (rounded off to the nearest number) and the threshold of the opposite direction will remain unchanged.
For example if the BSE mid-cap has moved up by 5 percent in the month, then the upper limit of monthly price band shall be adjusted by 10 percent that is the upper monthly price band shall be 110 percent whereas the lower price band would remain as 100 percent, BSE said.
"In the event of any corporate action, the respective price of the security shall be adjusted as per the prescribed process," the stock exchange said.
