ISE introduces uniform official closing prices

The Irish Stock Exchange has moved to prevent market manipulation in after-hours trading by changing the way it defines official closing prices.

The change, which came into force on Monday, will make it impossible for "over-the-counter" trades made after the exchange's electronic trading system closes to unduly influence a listed company's valuation.

Under the new rules, the official closing price for all instruments traded will be determined at the end of the exchange's daily closing auction at 4.30 p.m. rather than on the basis of the last traded price, as was the case until this week.

This means that trades made in the "post trading" phase at 4.30-5.15 p.m. will no longer affect the official closing price, thus eliminating any possibility of late trades out of the normal price range being made "off the order book" in order to manipulate the market. The tight controls in application under the exchange's electronic system make it almost impossible to conduct such deals during normal trading hours.

An exchange spokesman said yesterday the move was a response to requests from market participants who wanted to see the official closing price being determined at the same time every day. "It's not only to prevent market manipulation," said Mr Mark Scully, systems and information executive, who acknowledged it had been possible under the old system to enter prices "off spread", or out of the normal range, once the electronic system had closed.

He said the change was not a response to any specific suspicions about manipulation, adding that it reflected good practice already in application on the London Stock Exchange.

A uniform official closing price would also make it easier to introduce the trading of derivatives on the exchange, said Mr Scully. A spokeswoman for one of the larger brokers expects the change will be widely welcomed, since it would eliminate "operational difficulties" inherent in the current system.