The New Auctional Pricing Mechanism "Ticks Size"
Introduction
In light of Bahrain Stock Exchange’s (BSE’s) efforts to develop trading mechanisms in order to increase shares’ turnover and enhance the pricing mechanisms at the Exchange, BSE’s management decided to amend the pricing ticks size as of Sunday, 14th of June 2009, taking in consideration that this amendment will not affect BSE's main and sub-indices or the market capitalization of listed companies.
The Current Ticks Size
The current auctional pricing mechanism “Ticks Size” considers one fils for all shares traded in Bahraini dinars, and half cent and one cent for the shares traded in US dollars.
The New Ticks Size
The new “Ticks Size” mechanism classifies the shares traded into four categories according to their market prices. The following tables show the new categories along with their values:
Price Ticks Size Table (BD)
| Category | Price Category (BD) | Tick Size (Fils) | |
| From | To | ||
| 1 | 0.001 | 0.200 | 1 |
| 2 | 0.202 | 0.500 | 2 |
| 3 | 0.505 | 1.000 | 5 |
| 4 | 1.010 and above | 10 | |
| Category | Price Category ($) | Tick Size (Cent) | |
| From | To | ||
| 1 | 0.005 | 1.000 | 0.5 |
| 2 | 1.010 | 2.500 | 1 |
| 3 | 2.520 | 4.500 | 2 |
| 4 | 4.550 and above | 5 | |
Q. What will happen to the open orders that are already in the trading system which are based on the old pricing mechanism and do not match the new mechanism on the first day of implementation?
A. The system will automatically freeze those open orders on the first day of implementing the new auctional pricing mechanism “ticks size”. The broker will have to re-adjust the prices based on the new mechanism and the category that belongs to the price entered according the client’s instructions.
Q. What will happen to the previous closing price on the day of implementing the new ticks size applied if it does not meet the new categories ticks size?
A. The previous closing price will not change even if it does not satisfy the new categories tick size, it will remain the same until a transaction takes place.
Q. Will there be any changes to the daily fluctuation percentage currently allowed?
A. The Exchange will maintain the 10% as a maximum limit up and down.
Q. Is it possible to move within more than one category during the trading session?
A. It is possible to do that as long as the price of the order is within the minimum and maximum daily price range.
Q. Does this new mechanism apply on all shares markets?
A. Yes, it applies on all shares markets including the regular market, special orders market and the IPO market.
Q. How will the new ticks size deal with the newly listed companies?
A. Newly listed companies are traded in the IPO market. On the first day of listing, the prices of these companies are allowed to fluctuate between all categories without being limited to the 10% limit enforced on other markets.
Q. Is it possible to place an order at a price that is at the end of a category and the beginning of the next category? i.e. Is it possible to place an order at a price of 201 fils if the maximum price of the first category is 200 fils and the minimum price of the second category is 202 fils?
A. No, it is not possible because the order will be automatically rejected.
Q. Will the market capitalization be affected with the implementation of the new mechanism?
A. No, it will not be affected because the closing prices will remain the same.
Q. Will the previous closing prices of shares be adjusted according to new ticks size with the implementation of the new ticks size?
A. No, previous closings will not be adjusted.