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| Information Center |
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| Stock Exchange trading methods: price minimum amount method and single auction price method. |
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| Answer: |
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Single auction price method: Method of matching offers at organized trading and probing for shares of chosen companies.
Secondary trading single auction price method is defined by these below: |
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pre-open trade – a period of time dedicated to delivery and admission of orders from members of the Stock Exchange, |
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auction – a period of time in which, single auction price is confirmed, |
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trading – a period of time in which, transactions are closed at single auction price, |
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closing trading– an occurrence dedicated to admission of orders at confirmed single auction price and closing entry transactions. |
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From the instant of scheduled shares trading for elected companies on the Stock Exchange, brokers have the ability to enter orders to sell and buy in the Stock Exchange system for this period of time. Orders are entered into the Stock Exchange system every working day until the day of trading 12 hours, and with this in mind are capable to form a table of offers and demands.
The system of the Stock Exchange based on entered orders - format prices single auction price – where the most number of shares change ownership are made possible on the grounds that they respect single handed requests of all individuals who are potential purchasers, in regards to selling shares, expressed in the specialized instructions between the client and his broker.
However, if there was trading of these shares in an earlier period at initial price during scheduled trading it then acquires the achieved price from previous trading. After matching offer and demand orders, the price can change by +20 or -20% with relation to the price of the previous trading.
If trading is absent in a previous period, the initial price is acquired by "Restated Accounting Value", which is quoted in the Prospectus and can be changed by +50, or -20% with relation to that value.
Method’s following procedures:
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The broker, for the seller gathers orders to sell from potential seller’s shares at different prices, |
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In case the share has never been traded before, the broker schedules for the seller, trading on the Stock Exchange by "Restated Accounting Value", |
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On the basis of received orders, Broker, for the "reserves shares" in the Central Register and enter data from the order in the Stock Exchange system with data on his provision and the bank where the seller opened an account, |
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An interested buyer will go to his broker and give an order to buy, open a dedicated account; make a deposit in the value amount of the shares that he is interested in purchasing, plus taking into consideration a commission expense and sign authority over to the broker, |
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By stipulated date of trade, for the buyer, broker enters his order to sell in the Stock Exchange system, |
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On scheduled trading, besides these brokers other brokers can attend, on the grounds that they have fulfilled all the prerequisites, |
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The system of the Stock Exchange, based on entered orders to sell and orders to buy, the system formats a chart of offers, demands, and figures out a price by which the largest number of shares change ownership and form electronic closing notes which are sent to the Central Register in the goal to transfer money to the seller and shares to the buyers, |
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After receiving closing notes, the Central Register on the same day transmit to brokers and banks all the available data on the sellers, which they verify the very next day, |
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After completion of verification the Central Register completes transfer of bought shares out of the company’s account to the ownership account belonging to the buyer, and currency from currency account to seller’s currency account, no later than 3 days from completed trading day, |
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Seller’s broker and buyer’s broker inform their clients on completed orders to sell/buy and they inform their client on the status of their ownership account after completion of the order. |
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Three days from the day of trading on the Stock Exchange is the deadline for payment to the account of the seller and transferring ownership of shares to the buyer.
Remark:
Before matching orders on the Stock Exchange, there are priorities on orders that have chosen prices before they were even entered into the system of the Stock Exchange. The single auction price orders have priority over orders formed by a specific price. The orders that are received by single auction price are understood, as the seller is ready to sell, in other words the buyer is ready to buy shares by the price of 20% higher or 20% lower from the price that was identified as the starting price at scheduled trading.
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"Minimal Price" Method – This is the method that is reserved for selling shares out of the Share Fund Portfolio. The broker who schedules trading by this method has to be authorized by the Share fund and in this case, offers for sale a minimum of 10% and a maximum of 15% of the company’s shares.
This method understands that every potential buyer who wins imputation must buy all offered shares at minimal price that was scheduled at trading. A win is defined by the situation of two or more interested buyers competing through trading, and in this way raises the price, until just one buyer is prepared to pay the ending price. Method procedures below:
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The broker, for the seller together with the Share fund confirm the price by which they will schedule trading, which can be at the least 20% lower than the price achieved at the previous trading of the company’s shares, |
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The broker, for the seller schedules trading on the Stock Exchange by a confirmed price where they then quote the price and exact amount of shares which will be offered at the sale (per that price), |
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Based on the confirmed trading date, the broker for the seller sets forth an ad – an invitation to all interested buyers in the daily paper. This ad contains the required deposit amount that a potential buyer must have in his dedicated account, a transfer of ownership to himself and available resources in that account, in case of after completed trading the buyer does not pay the seller the whole amount that was due upon completion of trading, |
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Interested buyer goes to his broker, places an order to buy, opens a dedicated account, makes a deposit (stated in the ad), signs authorization and secures resources for payment by which he is prepared to compete for the purpose of buying shares, |
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The broker, for the buyer presents evidence of a paid deposit and signed authorization for the sellers broker, which according to that issues a certificate that can be used for participation at scheduled trading, |
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At scheduled trading absent of broker sellers, there are broker buyers from whom they have received their certificate from, |
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Broker buyers compete in raising the price per share, |
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In the end there is only one broker buyer who signs the closing note with the broker seller, |
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After signing the closing note, the broker in place of the buyer provides data on his client – buyer for the broker seller, |
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The Central Register receives data on Stock Exchange completed transactions and completes the transfer of shares and currency by the methodology referring to the method of "single auction price". |
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| Deadline for payment of resources to the seller's account and transfer ownership of shares to the buyer is three days from day of trading on the Stock Exchange. |
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