RE: PME11 Mar 2020 14:11
What is the purpose of a price monitoring extension?
As already discussed, the extension draws attention to a potential price movement. By doing so, this allows participants to review the prices of the orders that they have entered and if appropriate add, delete or amend.
The extension also indicates to investors that there may be the potential of getting a good deal for the security in question, thereby encouraging their involvement and so stabilising the price through the inputting of acceptable orders.
Ultimately, though, the point of the extension is to ensure any resulting price is a fair reflection of the security.
Are price monitoring extensions good or bad?
Price monitoring extensions can be alarming if you’re not expecting one, or you know it’s a precursor to a drop in share price. Nevertheless, they are there to help remove volatility from the market by slowing down trading and encouraging the market to reach a more considered price rather than moving around on individual trades. Considering the lower levels of liquidity on AIM, price monitoring extensions can be considered, then, an important mechanism to safeguard investors.