SEC imposes circuit breaker on Z category shares

Share prices of errant companies on the stock exchanges from now on cannot exceed a certain limit, up or down, on a single trading day, as the market regulator introduces a circuit breaker system on trading of Z group shares from today.
The Securities and Exchange Commission (SEC) yesterday took this decision to prevent unusual price movement of shares of the companies, which are not holding annual general meetings and paying dividends regularly.
“We have imposed the system so that the prices of Z category shares cannot witness unusual price movement on a single day,” said Farhad Ahmed, executive director of the SEC.
Prices of most of the Z group shares increased yesterday following a move by the regulator to improve the situation of the errant companies.
Of the issues traded under Z group on the Dhaka Stock Exchange (DSE) yesterday, 69 advanced and six declined with three unchanged. At present, around 97 companies are under Z category on the DSE out of 269 companies.
Earlier on March 13, 2004, the market watchdog withdrew the circuit breaker system on trading of Z category shares.
Presently, the circuit breaker system controlling the price of individual shares is effective on trading of A, B, G and N category shares.
On Tuesday, the SEC confirmed that the commission has set a six-month timeframe for the errant companies to improve their situation, according to a notification of the commission.
In default, the SEC can dissolve the board of directors and constitute new board by involving the general and institutional shareholders. The new board will be given 24 months with all necessary supports to run and improve the situation of the companies. In the case of failure of the new boards, the companies will be given six months for liquidation.
On Tuesday, the SEC also ordered sponsors or directors of errant companies not to sell, buy or transfer their shares from yesterday until further order.
Under the circuit breaker system, prices of shares with a market value of up to Tk 200 cannot rise or decline by more than 20 percent.