PSE pushes single 10% dynamic threshold for all securities

The Philippine Stock Exchange (PSE) is proposing a uniform 10-percent dynamic threshold for all securities, tightening the limit on price swings between trades for less frequently traded issues.

The proposed threshold would cap the allowable price difference between consecutive last traded price updates during continuous trading, regardless of how often a security changes hands.

PSE currently applies a 20-percent threshold to securities traded 20 times or fewer in the preceding six months.

Those traded 21 to 500 times have a 15-percent threshold, while those traded more than 500 times already face a 10-percent limit.

Newly listed securities currently start with a 20-percent threshold.

Under the draft amendments, an order that would breach the dynamic threshold would temporarily freeze trading in the affected security.

While the freeze is in place, orders cannot be posted, modified or canceled. The exchange would decide whether to accept or reject the breaching order under its implementing guidelines.

For a partially matched order, PSE would act only on the portion that would breach the threshold.

Block sales, negotiated trades and cross transactions would be exempt.

Negotiated trades are already subject to a 5-percent limit relative to the reference price, while cross transactions must be executed within the best bid and best offer.

“The proposed standardization of the dynamic threshold will make execution simpler and easier for both the exchange and market participants and optimize PSE’s operations by eliminating the semi-annual review of the dynamic threshold classification and the reclassifications in between review periods,” PSE said.

This would also bring the exchange in line with the Singapore Exchange’s uniform 10-percent dynamic limit.

PSE said it wants to retain the threshold as a “speed bump” against erroneous order entries, known as fat-finger errors, and sudden intraday price movements.

On this, PSE will accept comments and requests for clarification until Nov. 19.