Moscow Exchange changes trading rules to fight seesawing of illiquid shares, CBR warns of consequences
MOSCOW. Sept 20 (Interfax) - The Central Bank of Russia (CBR) has warned market participants whose actions lead to artificial spikes and drops in prices for illiquid shares to keep in mind that they can be held accountable, including criminally.
The CBR and the Moscow Exchange on Wednesday announced the adoption of measures intended to "modernize the design of organized trading of shares in third-tier companies." They are aimed at curbing the growing wave of discrete auctions for shares on the exchange, the number of which recently topped 50 in a single day.
"Instances of destabilization of pricing for shares of companies in the third level listing have become more frequent recently, which leads to increased volatility on the stock market. As a result, the exchange price of certain securities can change significantly several times in a short period of time," the CBR said in a statement.
"To a large extent this is due to an imbalance of demand and supply on the stock market, as well as the emotional behaviour of investors. They react to reports on social media that motivate them to make unidirectional transactions with a certain security," the CBR said.
"The organization of schemes aimed at forming nonmarket pricing will be considered as manipulation of the market. By decision of the Bank of Russia, if guilt is established, exchange transactions may be restricted for both trading participants and their clients. In cases specified by Russian legislation, provision is made for criminal liability," the CBR said.
The Moscow Exchange said in a press release that as of September 21 the maximum deviation of bid prices submitted by market participants to buy shares and depositary receipts of Russian issuers included in the third level listing will be restricted to 22% of the previous trading day's closing price.
If prices are destabilized, the exchange said it will establish asymmetrical price corridor boundaries.
The exchange also said it is refining a way of holding discrete auctions for shares and depositary receipts for earlier conversion of bidding in this regime if there are signs of destabilization.
CBR deputy governor Filipp Gabunya mentioned the growing practice of prices being bid up for shares with low liquidity earlier this month. He said the CBR and Moscow Exchange would work on eliminating it.
The CBR noted the growing influence of Telegram channels and bloggers on retail investors' decisions in its August report on financial market risks. This has a number of negative effects, including the possibility of price manipulation, the CBR said.
The CBR pointed to cases of shares in second and third tier small-cap companies being manipulated through Telegram channels on investment and finance. There were eight attempts to influence the price of shares through Telegram channels in the first two months of 2023, compared to 13 in all of 2022, the CBR said.