More stocks on NZX Markets are set to feel the benefit of greater liquidity and better price discovery as a result of a price steps initiative trialled this year by NZX.
The introduction of $0.005 price steps, in place of the standard $0.01 increments for NZX Main Board stocks that trade over $0.20, began on a trial basis in March 2011. The trial was introduced to measure the impact on liquidity of slightly smaller price steps in stocks that typically trade at very narrow spreads on New Zealand markets.
“The results of this trial showed that the reduced price steps had a positive impact on liquidity in the selected stocks, which is good news for the companies, for investors and our wider markets. The more liquid the stocks, the more they attract the interest of the wider investment community,” said NZX CEO Mark Weldon.
“The success of the initiative, and the response to further consultation with the investment community, has prompted us to introduce the $0.005 price steps for dual listed and New Zealand property sector stocks that trade under $2.50. We expect to see the same positive liquidity impact for these stocks too,” said Weldon.
The wider group of stocks was selected following careful analysis that indicated they would be most likely to benefit from a greater degree of flexibility in their pricing.
NZX will continue to evaluate the effectiveness of price step changes as part of a measured approach to liquidity initiatives, for the benefit of New Zealand markets.