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DFM introduces unified fluctuation band of 15 per cent up and 10 per cent down for listed securities.

The Dubai Financial Market (DFM) will introduce a unified fluctuation band for all listed securities within the one trading session based on 15 per cent up and 10 per cent down, as of 2 January 2011. Additionally, the exchange will adopt modified rules for the DFM General Index (DFMGI) to further reflect the highly-traded stocks and accurately mirror the market activity. Accordingly, it said, the most traded stock representation in the index increased to 81 per cent.

Based on the new modifications, DFM-listed securities will be grouped in one category and traded under a unified fluctuation band, contrary to the split between Active and Non-Active. The DFM said ,"It is noteworthy that the current fluctuation band is 15 per cent up and 10 per cent down for Active stocks and five per cent up and down for Non-Active stocks."

Essa Kazim, the Managing Director and CEO of the DFM said, "The new rules will -. enhance trading activity on the current Non-Active stocks which includes some of the major UAE public joint stock companies such as Emirates NBD, SHUAA Capital, Mashreq Bank, Commercial Bank of Dubai, Gulf General Investments and others."

The maximum weight of a single stock in the index will be decreased from 25 per cent currently to 20 per cent. The DFM said the aim is to limit the reflection of high market capitalisation stocks on the index and balance the effect amongst different stocks.

Additionally, the DFM has set guidelines to limit the percentage of free float shares included in the index at only 20 per cent of the less traded stocks with the purpose of minimising the stocks affecting the index.

The DFM said the selection of the most traded stocks listed in the index is based on the following criteria:

The total trade value of the company shares shouldn't be less than one per cent of the total trade value of DFM during the evaluation period, or 10 per cent of the company's market capitalisation (Velocity) at the end of the evaluation period.

The company shares should be traded on 50 per cent of the total trade days throughout the evaluation period.

Total number of transactions on the company shares should not be less than 150 transactions.

The trade volume should not be less than 500,000 shares throughout the evaluation period.

The total trade value shouldn't be less than AED 100 million throughout the evaluation period.

"The DFMGI is based on the total market capitalisation adjusted by the Free Float. The weight of any company represented in the index is decided according to the number of free float shares with the exclusion of the government ownership and major stockholdings that are five per cent and above. The new rules saw no change regarding the calculation of the market capitalisation based on the last trade prices, which reflects the market activity accurately," the DFM said.

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Publication:CPI Financial
Date:Dec 26, 2010
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