The National Stock Exchange (NSE) has decided to alter its price band following the Securities and Exchange Board of India (Sebi) decision to have a uniform price band at all the stock exchanges.
The internal committee of the exchange which met yesterday has decided to have only two set of price bands operative at the exchange. Under the new price band structure, all securities that are priced at Rs 10 or above will have a daily price band of 10 per cent on both the upper and the lower ends.
All such securities will also have a weekly price band of 25 per cent on either side. Earlier, the NSE had decided to have in place a three-tier price band based on liquidity and volatility of the securities.
However, all securities that are priced below Rs 10 will continue to have a daily price band of 15 per cent on either side and a weekly price band of 30 per cent. The NSEs decision has been prompted by a recent Sebi order, which stated that all stock exchanges across the country are required to have a uniform 10 per cent price band. Sebi had earlier fixed a price band of 10 per cent but the individual stock exchanges were given the freedom to fix stricter price bands in place. To be on the safer side, the exchange decided to reduce the downward slide of securities to 7 per cent soon after the South-East Asian markets crashed.
A uniform price band will be a welcome change as this will help securities to be quoted at the same prices at various bourses. Also on days when there is no selling or buying members of no particular exchange will have an advantage over the other. The trading members of NSE have been complaining that BSE members had an advantage over NSE members because of the disparity in the price bands.
The NSE earlier had a three-tier price band based mainly on liquidity of the scrips rather than on their volatility. Thus the exchange decided to put 100 companies comprising Nifty and Junior Nifty in a daily price band of 10 per cent and a weekly price band of 25 per cent. Another 491 securities having reasonable liquidity were placed in a daily price band of 7 per cent and a weekly band of 20 per cent.
The balance 903 scrips were placed in a daily price band of 5 per cent and a weekly price band of 15 per cent. However, NSEs recent decision to alter the price band of all the securities on the last day of settlement created an uproar which forced Sebi to impose a uniform price band at the exchanges.
The BSE on the other hand already had a 10 per cent daily circuit filter for all securities which were priced above Rs 20.