Stock Price Formulation
What are the 'daily price limits'?
Update : Jan. 04, 2010
Answer :
Stock prices are determined on a real-time basis by the equilibrium between bids and offers. In order to protect investors from excessively volatile markets, TSE sets 'daily price limits,' which limit the maximum range of fluctuation within a single trading day.
Exchange markets should in principle be free of price and transaction restrictions.
However, excessively violent price fluctuations due to an imbalance in the buy/sell equilibrium or due to speculative trading are not in investors' best interest. Additionally, the TSE market is a pure order-driven market without specialists or market makers to guide price formation. To prevent such wild volatility TSE sets daily price limits for each stock, within the parameters of which stock prices may fluctuate safely. These daily price limits provide a time-out and cooling down period in times of volatility.
Daily price limits are set in absolute yen according to the previous day's closing price ,last special quote price or last sequential trade quote price. (Please see 'What is the relationship between the base price and the previous day's closing price?' & 'What is a 'special quote', and how does it work?' for more details of closing prices and special quotes respectively.) As these price limits only prohibit trading beyond set parameters, stocks can continue trading even if they have reached the limit prices, provided prices remain within the parameters. Daily price limits are set out in the table below.
- What is the relationship between the base price and the previous day's closing price?
- What is a 'special quote', and how does it work?
For example, for a stock with a base price of 1,000 yen, trading may take place between 700 yen and 1,300 yen. Daily price limits apply to orders as well as transactions, so no orders may be placed at prices outside this 600 yen price range.
Daily Price Limits
| Previous Day's Closing Price or Special Quote | Daily Price Limits (±) |
| Less than 100yen | 30yen |
| Equal to or more than 100yen - Less than 200yen | 50yen |
| Equal to or more than 200yen - Less than 500yen | 80yen |
| Equal to or more than 500yen - Less than 700yen | 100yen |
| Equal to or more than 700yen - Less than 1,000yen | 150yen |
| Equal to or more than 1,000yen - Less than 1,500yen | 300yen |
| Equal to or more than 1,500yen - Less than 2,000yen | 400yen |
| Equal to or more than 2,000yen - Less than 3,000yen | 500yen |
| Equal to or more than 3,000yen - Less than 5,000yen | 700yen |
| Equal to or more than 5,000yen - Less than 7,000yen | 1,000yen |
| Equal to or more than 7,000yen - Less than 10,000yen | 1,500yen |
| Equal to or more than 10,000yen - Less than 15,000yen | 3,000yen |
| Equal to or more than 15,000yen - Less than 20,000yen | 4,000yen |
| Equal to or more than 20,000yen - Less than 30,000yen | 5,000yen |
| Equal to or more than 30,000yen - Less than 50,000yen | 7,000yen |
| Equal to or more than 50,000yen - Less than 70,000yen | 10,000yen |
| Equal to or more than 70,000yen - Less than 100,000yen | 15,000yen |
| Equal to or more than 100,000yen - Less than 150,000yen | 30,000yen |
| Equal to or more than 150,000yen - Less than 200,000yen | 40,000yen |
| Equal to or more than 200,000yen - Less than 300,000yen | 50,000yen |
| Equal to or more than 300,000yen - Less than 500,000yen | 70,000yen |
| Equal to or more than 500,000yen - Less than 700,000yen | 100,000yen |
| Equal to or more than 700,000yen - Less than 1,000,000yen | 150,000yen |
| Equal to or more than 1,000,000yen - Less than 1,500,000yen | 300,000yen |
| Equal to or more than 1,500,000yen - Less than 2,000,000yen | 400,000yen |
| Equal to or more than 2,000,000yen - Less than 3,000,000yen | 500,000yen |
| Equal to or more than 3,000,000yen - Less than 5,000,000yen | 700,000yen |
| Equal to or more than 5,000,000yen - Less than 7,000,000yen | 1,000,000yen |
| Equal to or more than 7,000,000yen - Less than 10,000,000yen | 1,500,000yen |
| Equal to or more than 10,000,000yen - Less than 15,000,000yen | 3,000,000yen |
| Equal to or more than 15,000,000yen - Less than 20,000,000yen | 4,000,000yen |
| Equal to or more than 20,000,000yen - Less than 30,000,000yen | 5,000,000yen |
| Equal to or more than 30,000,000yen - Less than 50,000,000yen | 7,000,000yen |
| 50,000,000 or more | 10,000,000yen |