When placing an order via Chuuma, the system performs validation checks to ensure that the order complies with the rules of the Lusaka Securities Exchange (LuSE), including the tick size.

Here’s how tick size validation works:

  • Definition: A tick size is the minimum price increment by which the price of a security can change. The tick size for securities on the LuSE is ZMK 0.01. This means that the price of a security can only increase or decrease in increments of 1 ngwee.

  • Validation Check: When an order is placed, the Chuuma system checks whether the price entered adheres to the tick size. If the price does not comply, the order will be rejected. For example, if you try to place an order at a price of ZMK 10.005, the order will be rejected because it is not in an increment of ZMK 0.01. The system would only accept an order at a price of ZMK 10.00 or ZMK 10.01.

  • Automated Process: The validation is an automated process performed by the LuSE’s Automated Trading System (ATS). When a Chuuma user places an order, the order is transmitted to the ATS, which then checks whether the price is in compliance with the tick size, among other validation checks

  • Order Rejection: If an order fails the tick size validation, it will be rejected with a comment indicating the reason for rejection.

  • No Manual Adjustment: The Chuuma system does not allow for manual adjustment of the price to meet tick size requirements. The user must enter a price that adheres to the tick size of ZMK 0.01.

  • Debt Instruments: The tick size for debt instruments is yield-based and is expressed in fractions of 1/32, that is 3.12513. Orders placed on a yield basis will be adjusted to the nearest tick size, and the price will also be adjusted correspondingly. If an order is entered at the midpoint between two tick sizes, the yield will be adjusted to the higher of the two tick sizes, and the price will be adjusted accordingly.

In summary, tick size validation is an automatic check that ensures all orders on the LuSE comply with the minimum price increment. Chuuma users must ensure their orders adhere to the tick size of ZMK 0.01. If the tick size validation is not met, the order will be automatically rejected by the system.