MANILA - The Philippine Stock Exchange (PSE) is proposing exemptions to the trading band rule, which caps increases in a stock’s price to a maximum of 50% and declines to up to 40% in a day.

Stocks in companies that have recently resumed trading after being suspended for quite some time would be exempted from the rule, under changes approved by directors of the bourse.

According to the stock exchange, the trading band under its existing rules shall be lifted "when trading resumes for securities that have been suspended for a period of one year or more" and "when the exchange determines that there has been an event or occurrence that may cause the price of the security to change drastically."

A company is also exempted from the rule if the "application of the trading band on the price may render impractical the trading of the security upon prior notice by the exchange as may be warranted under the circumstances."

PSE President Francis Ed. Lim said in a text message that the bourse would consider increasing the floor limit to 50% from 40% once a new stock trading system is implemented next month.

"With the new trading system, we are restricted to set only one value for up and down limits," Mr. Lim said.

The new trading ban exemptions came after some stock market veterans questioned the exchange’s move to lift the trading band for Liberty Telecommunications Holdings, Inc. in July — the first time since the volatility limit was implemented.

Last July 8, the share price of the moribund telecommunication company went up by 1,375% to P2.95 after resuming trading in the stock market following a four-year suspension.

Later that day, diversifying San Miguel Corp. told the exchange that it had bought a 32.7% stake in Liberty Telecommunications for P1.88 billion through wholly owned unit Vega Telecom, Inc.

Claire S. Quiray of Regina Capital Development Corp. welcomed the exchange’s move, pointing out that market forces should rule movements in stock prices.

"The logic behind the 50% and the 40% limits is to protect the investors from being manipulated by giving them time to digest certain corporate developments. But the stock market is a free-flowing entity and it is really up to the people to decide," she said.

Ms. Quiray added that it is hard to determine the base price of companies that have been suspended for a long period because they had been immune to the market’s highs and lows. As such, these stocks should not be covered by the trading band rule.

"If you are also looking at a company as big as San Miguel entering into a distressed firm, it is understandable if the stock price of the distressed firm will suddenly go up significantly," she said.

The exchange is giving concerned parties until Sept. 15 to submit comments. After the comment period, the new rules would be submitted to the Securities and Exchange Commission for review and approval.