Russia loosens trade halt rules over stock suspensions

Russia has loosened the limits on share price moves to prevent investors fleeing local exchanges for more predictable London trade.

Russia loosens trade halt rules over stock suspensions

Russia has loosened the limits on share price moves to minimise stock market suspensions and prevent investors fleeing local exchanges for more predictable London trade, a text of changes to trade rules showed.

Under the new rules, a rise or fall of 15 percent from the previous close would require the exchanges to enforce a one-hour suspension. A move of 25 percent would require suspension until the end of the day.

The main exchange indexes, the RTS <.IRTS> and MICEX <.MCX> indexes, would become the guidepost for suspensions, instead of their little-watched technical indexes which now dictate halts.

Foreign investor flight from emerging markets has laid bare an illiquid local stock market traded by hot money and lacking in local long-term institutional investors. The result has been regular double digit moves in share prices and key indexes.

Share indexes have tripped the limits -- currently at 10 percent on gains and 5 percent on falls -- on around a third of trading days in the final quarter of 2008, devastating the small pool of local institutional investors, who could not price their assets while trade was suspended.

Some funds stopped reporting net asset value, while some closed redemptions altogether.

Many market participants moved their trading operations to the London Stock Exchange, where trade in Russian Global Depositary Shares remained open and liquid.

It was unclear when the new rules would go into effect. They have not been officially published yet and must go into effect 10 days after official publication.

"The Justice Ministry has registered the provisions," a spokesman for the Federal Financial Markets Service said.

The regulator had planned to change the rules from Jan 1, 2009. Russia has 10 days of bank holidays starting on Jan 1 and local share trade will resume on Jan 11, a Sunday.

The changes require:

*At least one hour's suspension if the main exchange index moves 15 percent;

*Suspension until the end of the day if the index moves 25 percent or more, unless the Federal Financial Market Service orders a longer or shorter suspension;

*One-hour suspensions cannot be imposed after 4 p.m. local time ;

*When trade is resumed after a one-hour suspension, a longer suspension cannot be imposed within the first 10 minutes;

*Individual shares can be suspended for one hour if they move 20 percent within any 10 minute period, and until the end of the day if they fall 30 percent.

Reuters
Last Mod: 29 Aralık 2008, 15:57
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