The Nigerian Stock Exchange (NSE) plans to
halt trading if there’s a drop of 5 per cent in a bid to avert a crash in an
index that’s rallied 31 per cent this year, the second-best performing equity
market in Africa.
The Exchange is proposing a rule to stop trading
in all securities for 30 minutes if there’s “extraordinary market volatility”
on the Lagos-based bourse, it said in notice on its website. If the market
falls another 5 per cent, trading would be halted for the day, it said.
The Exchange is putting in the measures after
a market crash in 2008 spurred by a global financial crisis that prompted
foreign investors to sell out of Africa’s biggest oil producer.
In June that year, the bourse fell 3.8 per
cent, according to data compiled by Bloomberg.
The all-share index had its biggest one-day drop on record in September 2003,
falling 10.4 per cent.
“A 10 per cent market-wide move is highly
unusual in this market,” the Exchange said in the statement. “Time should be
given for the market to recollect itself before opening the next day,” it
added.
The Exchange wants public comments on plan
before July 22 with the rule coming into effect after approval by the
Securities and Exchange Commission (SEC). Stocks on the 192-member index can
advance or decline as much as 10 per cent in one day before trading is capped,
according to current rules.
By Bloomberg
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