3-decimal tick size for stocks below Dh1

The Dubai Financial Market (DFM) announced yesterday that the modified three-decimal tick size system will be applicable to securities with a market value below Dh1 only.

There will not be any change in the tick size for securities with a market value ranging from Dh1 to Dh10, which will continue to be traded with the unit of one fils. For above Dh10 securities, the tick size continues to be five fils as it was.

The new tick size has been framed by the exchange with an objective of enhancing trading volumes and enabling investors to trade in these securities with fractions of one fill. The modified 3-decimal tick size system for below Dh1 stocks will be effective from March 11.

The DFM, in a statement, said: "It's noteworthy that the tick size for the two categories – Dh1-Dh10 and above Dh10 – will be reviewed in light of the execution of the three decimal fractions on securities below Dh1."

The DFM last Thursday announced the tick size for securities in two categories below Dh10 and above Dh10. The tick size for below Dh10 was changed to Dh0.001 from Dh0.01, while the tick size for above Dh10 stocks was reduced from Dh0.05 to Dh0.01.

However, the DFM in its latest statement yesterday, said that the three-decimal tick size system will only be applicable to stocks below Dh1.

"It's a sensible move," said Mohammed Yasin, Shuaa Securities Chief Executive. "All the talk was about changing the tick system for stocks below Dh2 – that's where the most effect would be – to go to three decimal places for stocks near Dh10 is too much." He said brokers' order systems would be adapted to trade to three decimals and so any other changes the DFM later chose to make would be simple to apply. Around a quarter of the DFM's stocks ended yesterday at less than Dh1, so under the current system, these stocks move a minimum one per cent.

Day traders' favourites such as Union Properties and Deyaar are valued at less than Dh0.5, so move a minimum two per cent up or down, increasing volatility. (With inputs from agencies)

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