The Indonesia Stock Exchange (IDX) plans to lower the minimum share price that can be traded on the regular and cash markets to 1 rupiah ($0.00005), from the current 50 rupiah ($0.0028), as part of efforts to improve liquidity and price discovery.
The planned change is targeted to take effect on Sept. 7, following system trials with exchange members scheduled for Aug. 22 and 29, according to a local report on Thursday.
IDX president director Jeffrey Hendrik said the exchange was seeking feedback from market participants and assessing the readiness of trading platforms operated by exchange members before finalising the details.
“[The change is] to provide better access to liquidity and price discovery; we will remove the Rp50 minimum price limit,” said Hendrik.
The bourse held discussions with the Association of Indonesian Securities Companies (APEI) and the Indonesian Investment Managers Association (AMII) on Wednesday to gather feedback. It has also consulted global investors.
Under the proposed changes, shares priced at 1 to 10 rupiah would have a fixed auto-rejection limit of 1 rupiah for both upward and downward movements, rather than a percentage-based limit.
For shares priced at 11 to 200 rupiah, the auto-rejection limit would be 35% on the upside and 15% on the downside. Shares priced at 201 to 5,000 rupiah would have a 25% upside limit and 15% downside limit, while shares above 5,000 rupiah would retain a 20% upside limit and 15% downside limit.
The proposed changes would also remove two criteria from the IDX’s Special Monitoring Board.
One is the criterion covering shares with an average price below 51 rupiah and low liquidity over the previous three months. The other covers issuers that no longer meet other Special Monitoring Board criteria but whose share price remains below 50 rupiah.
The changes are intended to align the Special Monitoring Board rules with the proposed removal of the 50 rupiah minimum share price.
The IDX expects the move could also improve trading activity for stocks currently traded through the call auction mechanism on the Special Monitoring Board.
If these shares become eligible to trade on the regular market through continuous auction, their trading frequency and value could potentially increase by two to three times.
The proposed rule changes come as several stocks remain at the 50 rupiah minimum, including GoTo.
GoTo’s shares have been stuck at 50 rupiah since May amid investor concerns over the potential impact of the Indonesian government’s proposed 8% commission cap on ride-hailing companies on the group’s earnings.
The stock is also set to be removed from MSCI’s Indonesia index at the end of August, following several months of scrutiny by the index provider over concerns including limited liquidity. This could make it more difficult for index-tracking investors to trade the stock in sufficient size.
FTSE Russell, another major index provider, removed GoTo from the FTSE Global Equity Index Series Mid Cap Index in the last week of June.
The proposed changes could give stocks trading at the 50 rupiah floor more room to move below that level, while allowing the exchange to maintain differentiated auto-rejection bands across price categories.
