Starting tomorrow, Chaitra 07, the Nepal Stock Exchange (NEPSE) will introduce a 15-minute weighted average closing price rule. This innovative approach aims to curb price manipulation during the closing minutes of trading by calculating the closing price based on trades conducted between 2:45 PM and 3:00 PM. Each trade’s effect on the closing price will be proportionate to its volume, ensuring that larger trades will have a more significant influence.
In the past, the closing price was determined by the last executed trade, making it vulnerable to abrupt changes caused by lower volume transactions. The new system, however, assesses the weighted average price within the last 15 minutes, leading to more stable and transparent stock prices.
For instance, if a stock named “XYZ” has the following transactions during the specified timeframe—100 shares at NPR 100 at 2:45 PM, 200 shares at NPR 102 at 2:50 PM, 50 shares at NPR 99 at 2:55 PM, and 150 shares at NPR 101 at 3:00 PM—the total volume traded will amount to 500 shares. The aggregate of price-volume multiplications will equal NPR 50,500, resulting in a weighted average closing price of NPR 101, which will then act as the opening price for the subsequent trading session.
NEPSE anticipates that this rule will promote market fairness, prevent last-minute price irregularities, and bolster investor trust. While the long-term effects are yet to be assessed, this new framework is expected to foster transparency and stability in the stock market.
