Nigerian Exchange Limited (NGX) has launched a new rule intended to adjust its pricing methodology for listed stocks, to introduce a graduated, three-tier volume system for share price movements.

The move by the bourse reverts close to the 2018 market microstructure rules governing how listed stocks prices moved on the trading floor by setting minimum trading volume thresholds before prices can change.

With its effective date yet to be communicated, the new rule means the management of NGX has cancelled the uniform 100,000 units requirement implemented years ago, and returned to three-tier volume framework.

According to the new rule, “Price movements: the minimum quantity of equities traded that will change the published price of an equity security shall be as follows: Group A: Ten Thousand (10,000) units; Group B: Fifty Thousand (50,000) units and Group C: One Hundred Thousand (100,000) units.”

Under the new rule, stocks trading at N1,000 and above will require a minimum of 10,000 shares to be traded before a price movement can occur.

Equally, stocks trading at N500 and below N1,000 will require a minimum of 50,000 shares to trigger a price change, and stocks trading at below N500 will require a minimum of 100,000 shares to move the market price.

The development marks a significant shift in the exchange’s price discovery mechanism and is expected to affect trading strategies, particularly, in stocks where relatively small volumes have historically been sufficient to move prices.

Market participants say the move can help improve price stability and reduce the impact of low-volume transactions on share prices, especially in highly priced equities.

However, some traders are already expressing concerns that the new thresholds can reduce price responsiveness in less liquid stocks.

The policy comes amid heightened regulatory attention on market integrity, liquidity, and price formation as the Nigerian capital market continues to attract increased retail and institutional participation.

Commenting on the new rules, Managing Director of Globalview Capital Limited, Aruna Kebira, said, “This was how it used to be. High-priced stocks required 10,000 units, medium-priced stocks required 50,000 units, while lower-priced stocks required 100,000 units.

“So, in many ways, the Exchange is returning to a framework that operators are already familiar with.”

According to Kebira, the market has evolved significantly since the rule was changed, with several companies now trading at valuations that were uncommon a decade ago.

He stated, “We now have stocks worth trillions of naira in market capitalization. Requiring the same volume threshold across all categories no longer reflects market realities.” (THISDAY)

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