Block transactions may go beyond floor price

As block transactions do not affect stock market indices, they might be excluded from the ongoing floor pricing mechanism set to stop potential free falls, capital market stakeholders said on Saturday. 

They made the disclosure after an informal online meeting with Salman Fazlur Rahman, a member of the parliament and the private sector industry and investment adviser to the prime minister. 

The regulatory mechanism, imposed in March on the wake of the coronavirus pandemic to prevent individual scrip prices from dipping below a certain level, has reduced transactions in the stock market. 

Some investors, especially foreign funds who need to sell stocks for cash, are facing liquidity risk. 

The hours-long multi-party discussion on Saturday addressed this issue and there is a possibility that block market transactions will be allowed to go beyond current restrictions, according to some meeting participants who did not agree to be quoted. 

Currently, no block transaction is allowed to take place at a price beyond 10 percent of the last working day's closing price for the sake of market stability. And since floor pricing has been in effect, block transactions below the floor is also not possible. 

Meanwhile, most of the listed securities are stuck at the floor without attracting sufficient buyers amid ample intentions to sell. 

It is likely that the floor price will remain in place until demand gets stronger, but large investors that badly need liquidity – the ease of entry to and exit from the market – might enjoy the freedom to make securities transactions at an agreed price off the trading screen, said a meeting participant seeking anonymity. 

He also informed that policymakers are trying to support the market through fiscal measures in the upcoming national budget, alongside creating demand in the stock market by increasing the participation of banks, insurance and other potential sources of investment, including foreign portfolio investors. 

Professor Shibli Rubayat-Ul-Islam, chairman of the Bangladesh Securities and Exchange Commission (BSEC), had informed about the same efforts last week. 

After Saturday's meeting, he did not share any details, but he did tell The Business Standard that it was an informal discussion that addressed almost each of the major problems existing in the capital market. 

"The focus was on how to tackle the current problems in a sustainable way," he said. 

A brokerage professional present at the meeting said discussions also included meaningful automation in the operations of both exchanges so that trading can run in any situation, developing the bond market sooner, and a significant increase in institutional participation instead of the current situation where around 90 percent of market activity is retail-driven.