ASE set to apply two-tier, liquidity trading booster

The Athens Stock Exchange (ASE) yesterday approved the introduction next year of a two-tier trading system for shares, depending on the spread between sale and buying prices during sessions, which is designed to boost market liquidity. ASE chairman Panayiotis Alexakis said stocks will be categorized into low- and high-liquidity, measured in reverse relation to the size of the spread on the basis of an average-weighted index. «The spread encapsulates in the best way those indications for the information that the investor is seeking when considering trading a share,» ASE said in a statement. The measure, to be applied as of May 1, 2003, provides that shares with an average daily spread of less than two percentage points in the first four months of the year (usually high-liquidity, big capitalization stocks) will be traded for five continuous hours from 11.00 a.m. to 4.00 p.m. Shares that are traded by market makers will also be traded for five hours, irrespective of the spread. By contrast, low-liquidity shares, whose average spread exceeds two percentage points, will be traded in two periods, from 11.00 to 11.30 a.m. and from 1.30 to 4.00 p.m. In between these two periods, the electronic trading system will gather sale and purchase orders for the purpose of determining the opening price at the beginning of the second period. This procedure is designed to reduce volatility and prevent sudden speculative moves against such stocks. Low-liquidity stocks will be shifted to five-hour continuous trading if they show an average daily spread lower than 80 percent of the volatility limit or if they acquire a market maker. An ASE study, based on data from October and November sessions, concluded that 221 stocks fell in the high-liquidity category, while 138 were low-liquidity. Some of the former tend to be the object of speculative practices, and the high trading volumes they attract seem incompatible with the companies’ size. Such stocks have been classed «high-volume,» a special sub-category of high-liquidity shares, measured by the ratio of daily trading volume to capitalization. Stocks will be categorized every six months, according to data for the previous period collected on March 31 and September 30. ASE said the measures aim at enabling the investing public recognize those stocks owe their high volume to speculative moves. The above measures are supplemented by two others designed to boost transparency; one, being currently processed by the Capital Market Commission, aims to make the real economic picture of a listed firm much clearer in its published financial statements, and the second provides for all listed firms to undergo regular tax inspections.