05 Aug 2015

Capital market regulators leave price discovery of securities to investors, the Minister of Finance and Development Planning, Mr Kenneth Matambo has said. 

Mr Matambo said that limits price distortion and aids securities prices to be market determined.

“Consequently, securities prices adjust upwards or downwards to reflect underlying fundamentals of securities and markets,” he said. 

The minister said, however, that there might be instances where the suspension or closure of markets was necessary to contain panic and thereby assist price discovery in extreme situations. 

He said market interventions by the Botswana Stock Exchange (BSE) and Non-Bank Financial Institutions Regulatory Authority (NBFIRA) were provided for in the legislation and rules of BSE. 

Mr Matambo noted that Section 65 of the BSE Act gives the Minister of Finance and Development Planning the powers to suspend operations of the BSE where he considers that special circumstances requiring the suspension of the bourse exist, and that it was often in consultation with the BSE main committee. 

“Section 8.2.1 of the BSE trading rules empowers the exchange to impose a market halt in a number of circumstances such as upon the request of NBFIRA and technical failure of the automated trading system.”

Another, he said, was when the stock broker was unable to carry out its trading operations at its premises due to network or technical failure. 

“In such an event the market will be halted for a maximum period of 30 minutes to enable the affected broker to use the back-up facilities at the BSE,” he said. 

Minister Matambo said the Securities Act that was awaiting commencement order gives NBFIRA power to suspend the operations of the BSE when it deems necessary. 

Section 53(2) of the Securities Act, he said, prescribed that NBFIRA may suspend operations of an exchange where it was of the opinion that the price discovery on the securities exchange was being or was likely to be adversely affected such as when there was an emergency or a natural disaster or an economic or financial crisis. 

The minister said safeguard measures were in place to avoid share price meltdown as had recently occurred in China. 

Tati West MP, Mr Biggie Butale had asked the minister if there were any safeguard measures that could be put in place to avoid share price meltdown as had recently occurred in China.  Ends