The Council of the Stock Exchange Association (Amsterdam Exchanges NV) is to amend the ruling with regard to share price regulation in the wake of recommendations from the Committee for the Primary Market. The most important amendments relate to authorisation to stabilise share prices, trading for one's own account by syndicate members and the price at which intervention to stabilise prices is acceptable.
Share price regulation as referred to in the Stock Exchange Regulations is taken to mean the market intervention by an issuing syndicate within the framework of a capital market transaction in order to even out imbalances in supply and demand. Price regulation should be aimed at promoting a stable price formation and the maintenance of a fair and orderly market on behalf of investors and issuing institutions.
Price regulation is an internationally accepted practice in securities trading. Under certain conditions this measure may be deemed desirable to promote an orderly market during the period of the flotation or issue. In its evaluation of the existing ruling introduced in 1993, the Committee for the Primary Market focused in particular on recent developments and stipulations which have proved open to misinterpretation. The amendments are in line with international trading practice.
Price at which stabilisation is acceptable.
The new ruling distinguishes between the period in which securities are allocated and thereafter. During the allocation period specific stipulations apply only in cases where the stock is already listed and traded on the stock exchange. After the shares have been placed limitations on the price at which regulation is acceptable do not apply (any longer). Previously stabilising share prices at a level above the issue price was forbidden for the entire period to which the ruling applies. This stipulation has proved unnecessary and restrictive.
Trading for own account by syndicate members.
Members of the syndicate who manage its position (so-called book runners) and as such have a comprehensive insight into the progress of the share issue as well as those who have been appointed to stabilise the shares in question are required to abide by the price stabilisation regulations.
Prevention of market-adverse behaviour.
The Committee has further recommended the introduction of a supplementary clause to the price regulation ruling with regard to "market adverse" (market disruptive) behaviour by co-members of the issuing syndicate. In the past the syndicate leader was held responsible for the correct adherence to price regulation rulings, while syndicate members were not subject to regulations.
Authorisation to regulate share prices The new ruling allows members of the syndicate other than the lead manager to intervene to stabilise prices provided such actions are made known to third parties. The administration of transactions conducted for the syndicate's account with the aim of stabilising prices must be undertaken at a central level (by the syndicate leader). The same applies to derivatives transactions such as options and futures deals.
This supplementary ruling aims to promote the right balance between rights and responsibilities within the syndicate with respect to market behaviour in the interests of the smooth functioning of the Dutch capital market. Careful action is furthermore deemed desirable in view of the potential information advantage over non-syndicate members. Co-members of the syndicate who are not corporate members of the Stock Exchange Association are bound to adhere to the ruling under contract to the syndicate's lead manager. Agreements with foreign supervisory institutions will ensure an effective supervision of the role of foreign syndicate members.
The amendments have since been incorporated into the Stock Exchange Regulations.
For more information, please contact: T.J.A. Hoedemakers, Relations/Public Affairs: Tel: +31 20 523 4014 or Paddy Manning, Corporate Communications: Tel + 44 171 436 4101, or enter a text search "Amsterdam Exchanges NV" and Business Monitor".
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Business briefing Publishing Ltd, 1997 Tel: +44 171 820 7733
Share price regulation as referred to in the Stock Exchange Regulations is taken to mean the market intervention by an issuing syndicate within the framework of a capital market transaction in order to even out imbalances in supply and demand. Price regulation should be aimed at promoting a stable price formation and the maintenance of a fair and orderly market on behalf of investors and issuing institutions.
Price regulation is an internationally accepted practice in securities trading. Under certain conditions this measure may be deemed desirable to promote an orderly market during the period of the flotation or issue. In its evaluation of the existing ruling introduced in 1993, the Committee for the Primary Market focused in particular on recent developments and stipulations which have proved open to misinterpretation. The amendments are in line with international trading practice.
Price at which stabilisation is acceptable.
The new ruling distinguishes between the period in which securities are allocated and thereafter. During the allocation period specific stipulations apply only in cases where the stock is already listed and traded on the stock exchange. After the shares have been placed limitations on the price at which regulation is acceptable do not apply (any longer). Previously stabilising share prices at a level above the issue price was forbidden for the entire period to which the ruling applies. This stipulation has proved unnecessary and restrictive.
Trading for own account by syndicate members.
Members of the syndicate who manage its position (so-called book runners) and as such have a comprehensive insight into the progress of the share issue as well as those who have been appointed to stabilise the shares in question are required to abide by the price stabilisation regulations.
Prevention of market-adverse behaviour.
The Committee has further recommended the introduction of a supplementary clause to the price regulation ruling with regard to "market adverse" (market disruptive) behaviour by co-members of the issuing syndicate. In the past the syndicate leader was held responsible for the correct adherence to price regulation rulings, while syndicate members were not subject to regulations.
Authorisation to regulate share prices The new ruling allows members of the syndicate other than the lead manager to intervene to stabilise prices provided such actions are made known to third parties. The administration of transactions conducted for the syndicate's account with the aim of stabilising prices must be undertaken at a central level (by the syndicate leader). The same applies to derivatives transactions such as options and futures deals.
This supplementary ruling aims to promote the right balance between rights and responsibilities within the syndicate with respect to market behaviour in the interests of the smooth functioning of the Dutch capital market. Careful action is furthermore deemed desirable in view of the potential information advantage over non-syndicate members. Co-members of the syndicate who are not corporate members of the Stock Exchange Association are bound to adhere to the ruling under contract to the syndicate's lead manager. Agreements with foreign supervisory institutions will ensure an effective supervision of the role of foreign syndicate members.
The amendments have since been incorporated into the Stock Exchange Regulations.
For more information, please contact: T.J.A. Hoedemakers, Relations/Public Affairs: Tel: +31 20 523 4014 or Paddy Manning, Corporate Communications: Tel + 44 171 436 4101, or enter a text search "Amsterdam Exchanges NV" and Business Monitor".
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Business briefing Publishing Ltd, 1997 Tel: +44 171 820 7733
