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You are here :   Home > MARKETS > Trading > Market structure

Last modified date : 27/01/2011
 MARKETS

Market structure


The Stock Exchange is a regulated market on which transferable securities are publicly traded. The Stock Exchange comprises a central market, where buy and sell orders are matched for each security listed on the Stock Exchange and a block-trade market where listed securities are traded over-the-counter for a size equal to or greater than the minimum block size under price conditions derived from the central market.

1- Central market

The  market is a centralised, order-driven market. Securities are traded on this market either on a continuous basis or by auction as a function of their liquidity.

A trading session is made up of several inter-linked phases. Each phase takes place in accordance with trading hours determined by the Casablanca Stock Exchange for each type of trading method.

The main trading phases are defined hereafter :

 

Pre-opening :

During the pre-open phase, brokerage firms submit orders to the electronic quote-driven trading system using dealing terminals provided for their benefit. The orders submitted from these terminals are automatically registered in the order book without resulting in any trades. They may be amended or cancelled.  

A theoretical opening price is calculated and displayed on a continuous basis as soon as an order is introduced, amended or cancelled.
 

Close :

At the close, the system attempts to match orders previously submitted for each security and if successful, a closing price is displayed. From that moment, it is no longer possible to introduce, amend or cancel orders which have already been submitted.

Trading “At Last” :

This phase occurs after the auction. It is a phase of trading during which it is possible to enter orders and execute them at the closing price and at this price only.

During this phase of trading at the closing price, compatible orders are instantaneously matched using a FIFO algorithm (according to the time-priority principle).

 Supervisory and intervention phase :

During this period, brokerage firms are no longer able to submit new orders or to cancel or amend orders that have already been submitted. The market’s supervisory authorities may however intervene in the quote-driven trading system to create, cancel or amend trades or to cancel orders. The various phases of a stock market trading session are linked together depending on the type of quotation method (on a continuous basis or by auction) and on the terms adopted for each type.

2- Block-trade Market

Block trades are traded on an over-the-counter basis and are subject to two conditions :

 Size conditions (Minimum Block Size);

 Price conditions.
Size conditions
Minimum Block Size
The Minimum Block Size for each security is determined as a function of the change, over a period of time determined by the Casablanca Stock Exchange, under certain conditions which are calculated by applying the following criteria:
 
 The volume of securities traded on the central market and block-trade market;

 The price at which those securities are traded on the central market and block-trade market.
 

The Casablanca Stock Exchange selects the conditions, criteria and methods used to calculate the Minimum Block Size and these are published by notice in the Official Bulletin.

The Minimum Block Size may not be less than the threshold set by the Casablanca Stock Exchange, depending on the security’s characteristics and published in the Official Bulletin.

The Minimum Block Size for newly registered securities corresponds to the minimum threshold referred to above, except for new listings of secondary lines which are calculated based on the principal line and as a function of the terms of the corporate action from which the secondary line derives.

The Minimum Block Size is revised on a half-yearly basis. However, following an occasional check to ensure that the Minimum Block Size provides adequate market liquidity, more frequent revisions may be made if justified by market liquidity.

Please see Notice N°195/08 for the terms for calculating the Minimum Block Size.

Price conditions

Securities traded on a continuous basis

For securities traded on a continuous basis, block trades are carried out at a price between the upper and lower limits of the weighted average spread defined in relation to the central market and within the limits of the maximum price change applied during a stock market session.

a- Calculating the Weighted Average Spread

The weighted average spread comprises volume-weighted average prices of buy and sell orders on the central market. The aggregate number of securities taken into consideration must be at least equal to the Minimum Block Size of the security in question. Only the actual number of securities shown may be taken into consideration for calculating the weighted average spread.

Tick-by-tick data is not included in determining the weighted average spread.

In the event that the weighted average spread cannot be calculated due to an insufficient number of buy or sell orders on the order book required for the Minimum Block Size, the price adopted will be the first price limit, increased or reduced, depending on whether it is a purchase or sale, by up to 5%.

In the event that the weighted average spread cannot be calculated due to the halting of trading in a security, the price adopted, depending on whether the price limits are breached upwards or downwards, will be the upper or lower limits, increased or reduced by 5%.

Please see Notice Number 196/08

b- Examples


Example 19 – The Minimum Block Size for security V1 is 1000 shares, Reference Price = 100, Lower limit = 94, Upper limit = 106 The order sheet is as follows:

 

BID

Total size

Size shown

Price

100 100 102
220 220 101
560 60 101
1000 680 100
105 105 99
111 111 98
85 85 97
     
 

OFFER

Price

Size shown

Total size

104 10 100
104 23 23
105 102 230
106 100 100
109 82 82
110 912 1000
111 77 77
     
 

The Minimum Block Size being 1000 shares, first the buy, then the sell orders are aggregated to total 1000 shares, derived from the best bid and offer.

  Bid: ((100*102)+(220*101)+(60*101)+(620*100))/1000 = 100,48

  Offer: ((10*104)+(23*104)+(102*105)+(100*106)+(82*109)+(605*110))/1000= 100,23

A block trade relating to a number of securities equal to or greater than 1000 must be executed at a price of between MAD 100.23 and MAD 100.48.

Securities traded by auction

For securities traded by auction, block trades are carried out at a price between the upper and lower limits of the range determined on the basis of the last price quoted, increased or reduced by up to 1%.

Strategic blocks

A block trade relating to at least 5% of a listed company's share capital, or for a number of shares representing at least ten times the Minimum Block Size, without the number of shares being fewer than 2.5% of the total number of shares constituting its share capital, may be carried out at a price within 10% of the weighted average spread for securities traded on a continuous basis. In the case of securities traded by auction, the trade is executed at the last price dealt, increased or reduced by up to 10%.

However, with the agreement of the Conseil Déontologique des Valeurs Mobilières, the same procedure may be applied to a group of trades, constituting a single transaction, even if each individual trade does not relate to a number of securities respecting the size criteria specified above.

By dispensation of the first paragraph and with the agreement of the Conseil Déontologique des Valeurs Mobilières, the transaction may be carried out on different price terms providing that it relates to at least 5% of the company’s share capital and it is strategic.

Please see Notice N° 196/08

The price spreads for block trades are published by the Casablanca Stock Exchange at the end of the auction.

Declarations of block trades

Declarations of block trades are authorised at the end of the auction for securities traded by auction.

Declarations of block trades are authorised at the end of the auction’s open for securities traded on a continuous basis.

Block trades are prohibited :

 If the security is suspended ;

 If there is no order in the order book for securities traded on a continuous basis ;

 If there has been no trade in the security on the central market during that day’s stock market session for securities traded by auction ;
 
 During the offer period in the event of a takeover bid, exchange offer or buy-out offer for the security in question.
 
 

   


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