How Base Volume is calculated in Tehran Stock Exchange?

Posted on Posted in Business Guidelines

Base Volume is used to control dealings and prohibiting huge fluctuations in stock exchanges. Base Volume is assert only for the stocks which is listed in Bourse market of Tehran Stock Echange (TSE). TSE has 2 major markets which are Bourse and Farabourse, Base Volume is active only in Bourse market of TSE, in Farabourse no Volume base exists.

Base Volume of companies listed in Bourse market of TSE is calculated by multiplying 4/10000 to the number of shares outstanding. Maximum value of base volume is 10 billion Rials and its minimum is 500 million Rials, the number of base volume for each company is calculated by using the closing price in the last trading day of week, then this number will be considered as the base volume for the next week.

Example: assume that company A’s 4/10000 ratio is 3 million shares, if this volume is multiplied by the closing price of the last trading day which was 6,000 Rials, the result is 18 billion Rials. Through the instruction the ceiling should be 10 billion Rials, so for this company the 4/10000 ratio is omitted and the maximum number -10 billion Rials- enters to the calculations, after all, for calculating next week base volume, 10 billion Rials is divided to the closing price of last trading day of week (10,000,000,000/6000=1666667) and the number of base volume is 1,666,667.

On the other side, imagine that a company has 125 million outstanding shares 4/10000 ratio for it, is equal to 50,000 and the closing price of last trading day of week was 5,000 Rials. Product of closing price and volume is 250 million Rials which is less than the defined bottom (500 million Rials). Base volume of this company will be determined by dividing the 500 million Rials (bottom value) to closing price, the result which is 100,000 will be considered as the base volume for the next week.

Interesting point:

Suppose that a company’s shares all days of a week are traded in the range of +5%, in the end of week closing price of it has the growth of 27%, through the described instruction its base volume for the next week will be decreased which help it to experience the positive returns easily. Otherwise if a company is experiencing a week of negative price, its base volume for the next week will be increased, it prevent the stock decline easily.

Calculation of closing price:

Formula of closing price is as follows 5Which

P1 is closing price of previous day

P2 is closing price of current day

55 is weighted average price of current day

N is number of shared traded

M is base volume of the company

If N/M is bigger than 1, it will be considered equal to 1.