If you are trading stocks, you will often come across a bid-offer queue system that has a certain price range. If you are not familiar with bid-offers, please read: Stock Market Bid-Offer - Part I. Stock Market Bid-Offer - Part II. Stock Market Bid-Offer - Part III. Please see the example below.
Pay attention to the stock with this WIKA code, you can see, there is a queue for the Bid Price of 1.780 and below it is 1.775 and so on. The same thing happened to the offer price. The price range you see is called the share price fraction. Literally, the share price fraction is the limit of changes or multiples of the price allowed in buying and selling shares.
Why does the queue after 1,780 below it have to be 1,775, why not just 2,782 or 2,600?
That's what I'm going to cover in this post. You need to understand the rules of price fractions in the capital market correctly, so that you don't be careless in entering stock price orders. If you don't understand the share price fraction, you can enter a buy-sell order in an arbitrary manner. So, if you enter an order that does not match the price fraction, your order will automatically be rejected by the system, namely the Jakarta Automatic Trading System (JATS). The share price fraction in Indonesia, based on the most recent regulation from the Indonesia Stock Exchange, is now divided into 5 price fractions. Rules take effect as of May 2, 2016.
The old share price fraction is as follows.
Meanwhile, the new price fraction rule was applied as of May 2, 2016, divided into 5 price fractions as follows.
So now you're referring to the new share price fraction (5 price fractions). If you want to read about stock price fractions, and their impact on the capital market, I've already discussed in this post: New Stock Price Fractions and their Impact on the Capital Market. Also read: Know the Bid-Offer Spread in the Stock Market.
Illustration 1 explanation of share price fraction is as follows.
If you look at the share price of the company PT PP Properti Tbk (PPRO) currently in the price range of IDR 50-200. This means that the share price fraction is Rp. That means, if there is a price increase, the PPRO price increase will start gradually, starting from 196, 197, 198 and so on. Likewise, if there is a price decline, the decline will also gradually follow the price fraction, starting from 195, 194, 193 and so on.
If the share price fraction is Rp1, it means that the maximum change is Rp10 (see the table above again). What does it mean? For example, the opening price of PPRO shares is Rp. 196. So, the maximum increase in PPRO's share price is up to Rp206. The maximum increase refers to the opening price of the trading session of the day.
Illustration 2 explanation of share price fractions is as follows.
Watch the Waskita Karya (WSKT) stock queue below.
When referring to the price fraction, WSKT's share price is currently in the Rp500-2,000 price group. Therefore, the price fraction is IDR 5 and the maximum change is IDR 50. Pay attention to the queue of WSKT shares at the Bid Price and Offer Price, the price is always a difference of Rp5. So in this queue, you will not see the price of WSKT shares, which from the bid price of Rp. 1,780, suddenly the price queue below it became Rp. 3,047. The language is slang: sak karepe dewe. In other words, the queue of stock prices on the Stock Exchange that you see in the stock software, everything happens because of the price fraction rules that have been set by the Indonesia Stock Exchange (IDX).
Suddenly you have a brilliant question: "Brother Heze, if the price from 1,780 jumps to 3,047 in the queue below it is clearly too far away. Is it possible for the queue from 1,780, then immediately below it to jump to 1,770, without going through 1,775?"
Very likely.
"Well, earlier it was said that the fractional price was Rp. 5, right, the jump had to be Rp. 5. Your protest.
Don't be surprised if it turns out that the queue for the price of a stock sometimes jumps. For example, as in the example above, the WSKT price fraction is Rp5. This means that if the top bid price is IDR 1,780, the bottom queue price should be IDR 1,775. However, sometimes you can find stock prices whose queues jump (from 1,780 to 1,770). This is because there are no or no traders who put up a price queue at IDR 1,775, so the price is empty. Cases like this, you will usually encounter when the stock market just opens. If you are not familiar with the stock market opening hours, please click: Trading Hours on the Indonesian Stock Exchange.
Because the traders who put up the queue are still few, so there are some price queues that are still empty. The case is not a violation of the share price faction. The case is just a 'stepping' price. As long as the stock price multiples follow the price fraction, I don't think there's a problem.
In fried stocks, you will often find price queues that are "perforated" like that. Why? Simply put, fried stocks are illiquid. If you want to know the big price fraction vs small price fraction, which one gives faster money. Please read the post: Small vs Large Price Fraction, Which is the Faster Profit?.
The fraction and maximum level of price changes above are valid for one full Exchange day in the regular market and are adjusted on the following Exchange day, if the closing price is in a different price range. If there is a share price fraction, there must be a stock autoreject. Please read the post: Meaning and Illustration of Auto Reject Stocks.
