Securities Commission Malaysia (SC) and Bursa Malaysia Bhd will temporarily revise the rulings on circuit breaker (CB) guidelines for the FBM KLCI index as well as static and dynamic price limits for KLCI component stocks.
In a joint statement today, the regulators said they will be temporarily reducing the circuit breaker levels from three levels (10%, 15% and 20%) to two levels (10% and 15% only).
According to the CB rulings, the first level of the CB is triggered when the FBM KLCI falls by an aggregate of 10% or more but less than 15% of previous market day’s closing.
If the first level is triggered from 9am to before 11.15am and from 2.30pm to before 3.30pm, trading would halt for an hour.
However, if the first level is triggered from 11.15am to 12.30pm and from 3.30pm to 5pm, trading would be stopped for the rest of the session.
Meanwhile, if the second level is triggered — whereby the FBM KLCI falls by an aggregate of or more than 15% of the previous market day’s closing index — trading would be halted for the rest of the day.
For the price limits, the KLCI component stocks that are trading equal or more than RM1 per share, the upper limit price is capped at 30% intraday while the lower limit is set at -15% intraday. In terms of dynamic price limit, upper limit is set at +8%, while lower dynamic limit is capped at -5%.
As for KLCI stocks that are trading less than RM1 per share, the upper limit price is set at +30 sen, while lower limit price is capped at -15 sen. Meanwhile, upper dynamic price limit is set at +8 sen, lower dynamic limit is capped -5 sen. Currently, none of index component stocks are traded at below RM1.
The two regulators said the revisions will be applicable for a six-month period from July 20, 2020 to Jan 18, 2021.
“The decision for these precautionary measures took into account global market conditions that remain volatile amidst persistent uncertainties due to Covid-19, continued economic weaknesses and the re-escalation of geopolitical tensions.”
“The SC and Bursa Malaysia will continue to closely monitor global developments and take a prudent approach in implementing the necessary measures to support a fair and orderly market,” the regulators said.
IS IT BAD NEWS OR GOOD NEWS?
How do you think the market will react to bursa’s new regulation about limits and dynamic pricing?
My answer and personal view’s here, I wouldn’t say if it is good or bad news. I would say that Bursa thinks that the market is too volatile, so ensure any bad news in the world, our share prices will not one day drop drastically, but at least, there is circuits breaker.
THIS IS LIMIT UP AND LIMIT DOWN PRICE
So for 1 day, the price cannot move up more than
1) If the share price is more than RM1, so cannot move up more than 30%
eg. RM 2, maximum price for 1 day is RM2.60
If the price is less than RM1, maximum price is RM1.30
But limit down, last time also 30%, now they reduce to 15%
So if price is above RM1, say RM2.00, one day can only drop RM0.30 ( instead of RM0.60)
So if less than RM1, can drop only RM0.15, instead of RM0. 30
Dynamic limit is say, the last done price is RM1.00., the bid / ask price has very wide spread, because those stocks very thinly traded
So lets say last done price is RM1, the seller is at RM1.09, the order will be rejected by Bursa, so the Brokerage firm must write to Bursa to uplift the dynamic limit, then only you can key in.
But when it comes to the buyer side (bid) , if the last done price is RM1, any orders to sell at RM0.94 will be rejected by Bursa, until the request to uplift the dynamic limit is uplifted.
The dynamic limit used to be 8% for both buy and sell. That is dynamic limit. So e.g “Maybank” need to write to Bursa, then Bursa got to make announcement on its website Www.bursamalaysia.com, then only can be uplifted with.
Dynamic limit is automated by the system. So need to ask Bursa approval to sell. Irrespective whether they are in the component or not. It applies to all the counters.
Dynamic limit up 8% – Dynamic limit down 5%. If less than RM1, Up 8 sen and Down 5 sen.
This limitation’s nothing to do with a quantity of share you holding. It’s all about the prices.
Kindly find this attachment to get more explanation about the rules and dynamic limit. It’s also the old one and the new rule is what already revised above and the latest announcement.
Dynamic limit, its keeps moving and it follows the last done price. E.g: Let say last done price KOSSAN is RM12.38, so seller 1st ask is 13.40, so hit dynamic limit. Its about key in up or down. But the price still go limit up 30%. It’s only for key in. Its cannot key up sell above 8%, as long as someone later, come key to sell RM13.36, then can be transacted.
“It is like a ladder, you can climb maximum 2 steps at a time. So when one of the steps fell off, you can’t climb 3 steps at a time, so you got to wait for someone to replace the steps” – Kim
For shares below RM1.00, limit up is 30 sen (flat). For shares above RM1.00,limit up is 30%. So a counter at RM0.10 can limit up to RM0.40 (because flat 30 sen). So in percentage is actually 400%. There’s only 1 limit up or 1 limit down per day.
Lastly, I hope this write-up can help you clear what is your thoughts in your mind about What’s Static & Dynamic Price Limits.