Sri Lankan regulator to lift 10 percent blanket price band
document.title ='Sri Lankan regulator to lift 10 percent blanket price band - LANKA BUSINESS REPORT ';
Imposes new price formula, halts broker credit by 2011
Riyad Riffai
LBR,Wednesday 15 September 2010
Securities and Exchange Commission (SEC) is to lift 10 percent blanket price band and introduce a new formula on September 20, while brokering firms are ordered to refrain from extending credit beyond time plus three days (T 3 days) from next year, a statement said.
The new trading formula to be introduced by the SEC will not be open to the public, a senior official said.
The formula is based on a traded volumes and price fluctuation of stocks, reviewed every five trading days, the statement said.
On August 03, the SEC ordered the immediate suspension of trading in selected listed securities of which prices have risen by 30 percent or more in the last three market days and had more than 1,000 trades within the period.
The shares that came under investigation included Environment Resources Investments groups warrants 01, warrants 02, warrants 03 and warrants 06, and Dankotuwa Porcelain, a tableware exporter the cash-rich investment company acquired recently.
Other stocks that come under the trade suspension were normal shares and non-voting shares of Blue Diamonds Jewellery Worldwide, and Touchwood Investments, a forestry company.
The trade halt was lifted on August 05, after the firms in concern submitted a letter to the Colombo Stock Exchange saying they were unaware why their shares prices had fluctuated sharply.
Stocks that exceed the limits were subjected to a 10 percent upward and downward price band that will be imposed for 15 market days.
The price band was applied on the previous day's closing price, but excluded the first trading day on any security, stakes offered on all or nothing basis, crossings, debentures and securities where the previous closing price is below one rupee.
"The formula confirmed by the SEC in respect to all securities on a daily rollover basis for the preceding review period of five market days," the statement said.
If the limit on the new formula exceeds, investors will be required to pay at least 50 percent of settlement value upfront, the statement said.
The SEC said, from January 01, 2011, all stock brokering firms are banned from providing credit to customers.
"If credit is to be extended beyond the above specified period, to do only through a margin provider duly registered with Colombo Stock Exchange," the SEC in its statement said.
There is credible evidence that some of these "shell companies" and their owners who themselves are also "shell" companies are backed by the the most powerful in Sri Lanka.
ReplyDeleteMoney laundering seems to be the "key word" and black money is being slowly converted to legitimate profits.
The bubble may soon burst!