Tadawul’s new fluctuation limit offers investors more flexibility to reach fair price of securities: official

The new fluctuation limit mechanism on the Saudi Stock Exchange (Tadawul) aims to enhance market efficiency and provide investors with more flexibility to reach the fair price of securities, Mohammed Al-Rumaih, Chief of Markets at Tadawul, told Argaam in an exclusive.

The daily price fluctuation limit was expanded from ± 10% to ± 30%. The static price fluctuation limit was also placed at 10%, and the volatility auction was allowed when the stock is traded during the session.

“If we assume that the listing price of a stock was SAR 50 on debut in the main market, and if the stock rose by 10%, the volatility auction will take place for 5 minutes. The volatility auction, which deploys the same mechanism of the opening and closing auctions, will set the new price of the security,” Al-Rumaih explained.

Moreover, Al-Rumaih added that the number of volatility auctions is not limited during a trading session. This auction is triggered when the stock price gains/sheds 10% at a daily limit of 30%.

The new changes apply to newly-listed equities, REITs and closed-ended investment traded funds on the main market and Nomu Parallel market in the first three days of trading.

“We will continue to enhance market efficiency. We observe changes to know how much the existing operational frameworks are effective in consultation with market participants,” Al-Rumaih concluded.