By Nkiruka Nnorom
The Nigerian Stock Exchange, NSE, has commenced moves to curtail the usual free fall in the share prices of newly listed companies.
This is coming months ahead of the listing of MTN Nigeria on the Exchange and other listings expected this year.
It has been observed that prices of most companies newly admitted on the Official List of Exchange usually begin a downward movement immediately after their listing, resulting in significant loss to investors who bought the shares from the primary market prior to their listing or at the point of listing.
Consequently, NSE, in a notice to the dealing members on Wednesday, said it is developing a set of rules that would henceforth stabilise share prices post-listing and also facilitate their distribution to the public.
The Exchange explained that the proposed rule is aimed at supporting and maintaining the price of listed securities for a limited period after the listing or offer, thus establishing an orderly market for securities in the immediate secondary market after an offer.
The rules, according to the Exchange, would cover requirements for price stabilisation, price and period, permitted price stabilisation and permitted stabilising activities, criteria for stabilisation managers, responsibilities of the stabilisation manager, disclosure and reporting obligations of the stabilisation manager, amongst others.
It further stated that the rule would define the circumstances and manner in which price stabilisation will be permitted by the Exchange, in accordance with the provisions of the Investments and Securities Act (ISA), Consolidated Rules and Regulations of the Securities and Exchange Commission, SEC Rules 2013 and the Rulebook of the Exchange.
“Given that transparency is a prerequisite for the prevention of market abuse, it is important to ensure that adequate information is disclosed or reported prior to, during, and after any trading effected for the stabilisation of securities in order to avoid market abuse and illegal market practices.
“In addition, market integrity requires adequate public disclosure of stabilisation measures. Reporting of the stabilisation transactions is also necessary to allow competent authorities to supervise stabilisation measures. The proposed rules address the parameters of substantive price support in securities offerings. In addition, they serve as a defence to the necessary extent against prohibited trading practices, such as market manipulation, and breach of market abuse rules,” the Exchange stated in the notice.