The new trading rules are available at the PSE. Of course, reading through the report will test a bit of your patience if you're not someone who likes to go through all the details. Personally, what I found interesting and quite important is the change in the fluctuation table. Specifically, the board lot used to look like this -
| PRICE | MINIMUM FLUCTUATIONS | BOARD LOT |
| 0.001 to 0.0024 | 0.0002 | 1,000,000 |
| 0.0026 to 0.0050 | 0.0002 | 1,000,000 |
| 0.0055 to 0.0100 | 0.0005 | 1,000,000 |
| 0.0110 to 0.0250 | 0.001 | 100,000 |
| 0.0260 to 0.0500 | 0.001 | 100,000 |
| 0.0525 to 0.1000 | 0.0025 | 100,000 |
| 0.105 to 0.2500 | 0.005 | 10,000 |
| 0.2600 to 0.5000 | 0.01 | 10,000 |
| 0.5100 to 1.000 | 0.01 | 10,000 |
| 1.020 to 2.500 | 0.02 | 1,000 |
| 2.550 to 5.000 | 0.05 | 1,000 ** |
| 5.10 to 10.00 | 0.10 | 1,000 * |
| 10.25 to 25.00 | 0.25 | 100 |
| 25.50 to 50.00 | 0.50 | 100 |
| 50.50 to 100.00 | 0.50 | 100 |
| 101.00 to 250.00 | 1.00 | 10 |
| 252.50 to 500.00 | 2.50 | 10 |
| 505.00 and up | 5.00 | 10 |
By Monday, the board lot will look like this -
Notwithstanding the obvious difference in graphic layout, you will notice that the price fluctuations are a lot lot smaller now. For example, before, a stock with a price of 20 pesos would change every 25 centavos, such that a typical stock posting would look like this -
Bid Ask
10,000 20.00 20.25 5,000
Now, with the new system, a stock with a price of 20 pesos would look like this -
Bid Ask
10,000 20.00 20.05 5,000
What's the relevance?
Well, from an amateur stock trader's standpoint, depending on your broker, you already have a small profit with just ONE fluctuation if you were trading under the old system.
Now, assuming it's the same stock, you'd have to wait FIVE fluctuations just to get to the price of 20.25 for a profit with the new system. Further adding to the "difficulty" in making a buck is that there will be trading price limits based on what they call the Dynamic Price Threshold.
If I understand correctly, a stock will be frozen (i.e. temporary trading halt) once it hits its lower or upper Dynamic Price Threshold. Based on the information I got from Citiseconline.com -
The Dynamic Price Threshold** is computed as follows:
- Dynamic price threshold (upper) = last traded price + (last traded price multiplied by the dynamic tick)
Example:
If the last traded price for stock A is 5.00 pesos and it has a PSE defined dynamic tick of 0.05 then:
- Stock A dynamic price threshold (upper) = 5.00 + (5.00 x 0.05) = 5.25
I don't know why it's called a dynamic tick or if there's any connection to the dynamic duo, but this would make trading a bit, well, harder.
Without going further into the other details of the new trading system, this is the big question - Will the PSEi resume its uptrend come next week? The timing, at least to me, is off-putting. The ghost month is just over the horizon and based on my limited trading experience, is one of the bear months of the local market. It usually lasts until October before mounting what is known as a Santa's rally.
More importantly, will chart reading still be useful? I mean the price ranges now are different from the ones before. Will the prices of before be of any relevance to its future price action?
All these questions will be answered in the next few months, as old traders find ways to do new tricks and new traders probably adopting a wait-and-see mode.
I suppose given this, the market will most probably move sideways. I am not sure since I'm no fortune teller. Well, nobody said change was easy. I just hope that this is for the good and the new system would increase liquidity and volume of the market. If you think about it, volume would certainly pick up since based on my example, a trader will have to buy five fluctuations of a stock just to get to his profit target price.
Let's hope for the best.
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