Abnormal trades in new listing spark market halt at Colombo bourse

• Halt took place after detecting unusually high-priced transactions in newly listed WealthTrust Securities that raised concerns of systemic risk
• CSE noted market orders in stock were matched with abnormally high sell orders, resulting in sharp price distortions 
• SEC summons investors for inquiry today
• Investors who sold shares at these elevated prices subsequently used resulting buying power to purchase shares of other listed companies
• Trading on Colombo bourse is scheduled to resume as normal today
• WealthTrust further confirmed that no shares had been sold by pre-IPO shareholders

The Colombo Stock Exchange (CSE) halted trading minutes after the market opened yesterday, cancelling all trades executed during the session. 
The halt took place after detecting unusually high-priced transactions in the newly listed WealthTrust Securities that raised concerns of systemic risk spreading across the broader market, the exchange said.
WealthTrust Securities made its market debut on the Diri Savi Board yesterday (January 7). However, the CSE noted the market orders in the stock were matched with abnormally high sell orders, resulting in sharp price distortions. 
The market operator further observed that the investors who sold shares at these elevated prices subsequently used the resulting buying power to purchase shares of other listed companies, amplifying the risk of disorderly market conditions beyond the single counter.
Mirror Business reliably learnt that the Securities and Exchange Commission (SEC) has initiated an urgent investigation into the matter. The regulator has identified the investors who placed orders at excessive prices and has summoned them to appear today (January 8) for a comprehensive inquiry. Sources indicated that the SEC would take appropriate actions against the market participants and investors responsible for the incident.
Acting with the concurrence of the SEC, the CSE imposed a market halt at 9:54 a.m. and cancelled all orders and transactions executed yesterday. It cited the need to protect the investors and preserve confidence in the integrity of the securities market.
The exchange stressed that the unusual price movements were not attributable to WealthTrust Securities itself, which listed in compliance with the prevailing regulations.
As a preventive measure, the CSE said it would disallow market orders on the first day of trading for all future new listings, in a move aimed at curbing extreme price volatility at market debuts. 
Trading on the Colombo bourse is scheduled to resume as normal today (January 8). Meanwhile, in a separate statement, WealthTrust Securities said its understanding was that the trading halt stemmed from an isolated and seemingly erroneous trade by a market participant, which resulted in unexpected market activity in its shares. The company said the halt was a market-driven event and was not caused by any action, disclosure or transaction initiated by the company or its pre-IPO shareholders.
WealthTrust further confirmed that no shares had been sold by the pre-IPO shareholders and said there was no impact on the company’s fundamentals, operations or previously disclosed information. 
The company said it understood that the CSE is investigating the incident and urged the capital market regulators to act to prevent similar market disruptions in the future.
(SAA and NF)