Market Organisation
According to the Securities Market Law and Rules of SASE, the market consists of two main segments:
Official (Prime) Market
This is the place where our "blue-chips" are being traded. In order to be listed at this market segment, an issuer has to meet certain requirements. Listing requirements refer to operations of the issuer in the past few years, size of the capital, audited financial statements, size of the class of securities, number of shareholders and securities dispersion in public. After a company has been listed on the Sarajevo Stock Exchange, it has the obligation of continuous disclosure to the Stock Exchange and the public of any event or change in its operations that may be important to the company and/or its investors.
The criteria for the official market of companies are as following:
After the admission to this segment, the issuer is obliged to notify the exchange and the public of the price sensitive information that occurs (ad-hoc publicity requirements). The issuer is also obliged to provide the exchange with its quarterly, semi-annual and annual financial reports. All trading on the Official market is done using the continuous trading algorithm. The static limits for securities traded on the Official market are -10%/+10% from the previous official price. The dynamic limits are +/-3% from the reference price (see Volatility interruptions).
Free Market
The Free market is a segment of the organized securities market where those securities are traded, which have been successfully offered to the public and whose further public sale has been approved by the Securities Commission of the FB&H and which had not been listed on the official market. Due to a quite simple admission procedure, most issuers are listed on this market. An application for admission to the free market can be filed by a brokerage house (upon request of a client).
There must be a minimum of information available for an issuer to be listed on the Free Market. The Free market consists of 4 sub-segments, which differ in means of trading algorithm, maximum daily price fluctuations and transparency requirements:
Sub segment 1 (ST-1)
ST1 consists of the most liquid Free Market securities, which also have a free-float factor of at least 25% (or FF-market cap of 2 million KM). A review of symbols on ST1 is conducted every 6 months. Static limits are +/-20% based on the last official price.
Sub segment 2 (ST-2)
This is the entry-sub segment for all issuers being listed on the Free Market. The securities are traded through continuous trading. Static limits for this sub segment are set at +/- 50%. Dynamic limits are on a +/-3% level.
Sub segment 3 (ST-3)
This sub segment is reserved for issuers who fail to meet their disclosure requirements. Investors are warned regarding the higher risks associated with investing in such companies. Trading is done through two daily auctions, an the static limits are set very loosely, to account for the difficulty in pricing those securities.
Sub segment for issuers in bankruptcy proceedings
This sub segment is reserved for issuer where bankruptcy proceedings have been opened. Trading is done through the auction trading system with two daily auctions. There are no static limits in place, only dynamic limits in the range of +/-3%
In order to protect investors, SASE has two kind of price limits in place.
Static limits define the maximum daily allowed price fluctuation of a security based on its previous official price. If the price of an order which is to be entered in the trading system outside of the range defined by these limits, the order is transfered to the inactive order book, until its price is inside the static limits (which change along with the official price of the security). Static limit differ according to the market segment a security is traded on.
In order to prevent excessive price movements triggered by small trades made away from the market price and to prolong the order exposure time, SASE introduced volatility interruptions in September 2011. Volatility interruptions are triggered once the dynamic limits of a security are about to be breached. This happens when an order would trigger the conclusion of a trade at a price outside the dynamic limits range. The dynamic limits are based on the prevailing (reference) price. The reference price is the last official price of the security (in case there were no volatility interruptions this day) or the price from the previous volatility interruption.
In case the dynamic limits are breached, trading with this security is temporary suspended for a period of 15 minutes. In this period, the market enters again the pre-open phase, in which only entering and editing of orders is possible, but no trading takes place. After the 15 minutes pass, the market opens again through an opening auction, where the new reference price for the security is calculated. It is important to note that although the reference price can change multiple times per day, it cannot breach the static limits of the security.
Dynamic limits are currently set to +/- 3 % of the reference price, regardless of trading mode or market segment.