[2008-10-13]  NSE drafts rules to curb share price manipulation
The Nairobi Stock Exchange (NSE) has drafted new amendments to the current trading rules, aimed at curbing wild fluctuations in prices of listed companies upon announcement of “material information.”

According to the NSE chairman, James Wangunyu, the new rules will require investors in the trading session following a material announcement by listed companies to specify the price and quantity at which they wish to either sell or buy the stock.

The current NSE trading rules provide that the share price of a listed company can fluctuate by any margin on the first day of trading after listing at the stock exchange.

The rules also allow for an uncapped fluctuation in the next trading session following a material announcement by a listed company, a rule that players say has been exploited to facilitate execution of trades driven by non-fundamentals.

Share price variations on normal trading days are limited to a maximum fluctuation of 10 per cent on the assumption that the market value of a company cannot change by more than that in a single trading session except when influenced by new “material” information. “The proposed amendments are ready and will be forwarded to the Capital Markets Authority (CMA) for approval,” said Mr Wangunyu.

Material company information include announcement of periodical performance results, management changes, mergers and acquisitions.

The amendment proposals come as the East African Portland Cement (EAPC) share price edged closer to the pre - September 24 levels, when an “open” market order by a single trader brought down EAPC’s price by 43 per cent to Sh62 from the previous average of Sh108.

The EAPC share price fell after the company announced a 36 per cent drop in its pre-tax profit to Sh715 million for the year ending June 2008.

On Thursday, the share closed the week trading at an average price of Sh104, a 160 per cent rise on the lowest price of Sh40 on September 24.

Just two weeks earlier, the Crown Berger share price slumped by 48 per cent on announcement of the paint manufacturer’s half year results, which showed a 15 per cent increase in the pre-tax profits to Sh74.2 million.


Source: Business daily