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Abu Dhabi exchange’s new tick size to improve liquidity

The ADX upgraded the tick size based on a study of listed companies’ performance and market trading activity.Abu Dhabi exchange’s new tick size to improve liquidity

The Abu Dhabi Securities Exchange (ADX) has started trading with the new tick size for stocks of companies with a share price of less than Dh1. This move is expected to help improve liquidity in the market.

Tick size is the minimum price change between different bid and offer prices of an asset traded on an exchange platform.

The ADX began operations on Saturday with the new tick sizes which consist of five units: Dh0.0001 for shares within the price range of Dh0.1 to Dh0.99; Dh0.01 for a price range of Dh1 to Dh9.99; Dh0.02 for a price range of Dh10 to Dh49.98, Dh0.05 for shares within the price range of Dh50 to 99.95, and Dh0.10 for shares at Dh100 and above.

Rashed Al Blooshi, CEO, ADX, said upgrading the tick size will enhance liquidity, increase trading among investors and encourage them to buy and sell shares within the ADX’s legal framework.

The ADX upgraded the tick size based on a study conducted from the beginning of the year until mid May of listed companies’ performance and market trading activity. At the time of the study, there were 17 companies listed on the ADX with a share value of less than Dh1, with their value of trading reaching Dh3 billion. This represented 23 per cent of the total trading value on the exchange (Dh13 billion) at the time of the study.

The ADX also conducted a survey among brokers concerning the upgrade in tick size, which resulted in the finding that 70 per cent of brokerage firms were in favour of the upgrade.

The ADX has issued a circular to brokerage firms to amend the tick size for stocks of companies with a share price of less than Dh1.00. Furthermore, the exchange requested brokerage firms and data providers to ensure they update their internal systems that take orders, calculate commissions and produce customer statements in order to start operating the new tick sizes starting September 2, 2018.

Source : Khaleej Times

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