15% Free Float Greenlight: Navigating Market Liquidity and Selling Pressure Risks
JAKARTA — The Indonesian stock market is anticipating a period of temporary volatility as the Financial Services Authority (OJK) moves to implement a new 15% minimum free float rule. This significant regulatory change is set to redefine market dynamics, prompting experts to caution investors.
Market participants are strongly advised to exercise vigilance regarding potential price volatility, particularly for issuers with low liquidity. This warning comes in the wake of the OJK’s approval of revisions to Regulation 1-A, which mandates an increase in the minimum public share ownership, or free float, to 15%.
Muhammad Wafi, Head of Research at KISI Sekuritas, commented on the imminent changes, suggesting that the implementation of this new regulation could trigger short-term price corrections. The anticipated selling pressure is expected to emerge as controlling shareholders of companies with currently low free float levels will be obligated to divest a portion of their holdings to the public to meet the new minimum threshold.
Addressing the mechanics of this requirement, Wafi explained to Bisnis on Thursday (26/3/2026) that “controlling shareholders must release their shares to the public, either through a secondary offering or a private placement, to fulfill the minimum quota.” This strategic divestment is crucial for compliance, ensuring that a greater percentage of a company’s shares are publicly traded.
Despite the potential for initial turbulence, Wafi largely downplayed the risk of aggressive market dumping that could severely depress prices. This optimism stems from the regulator’s carefully structured plan for a phased implementation, which includes regular evaluations. This gradual approach provides a critical window for issuers to identify strategic buyers, such as institutional investors, rather than being forced into an immediate, large-scale sell-off into the regular market.
On the flip side, this policy is widely regarded as a significant positive catalyst for enhancing price formation efficiency in the long run. By increasing the actual supply of shares available to the public, the risk of price manipulation, particularly in stocks that were previously less liquid, can be substantially mitigated. This move fosters a more transparent and fair trading environment.
Wafi further highlighted that elevating the free float to 15% is an essential prerequisite for bolstering the appeal of the domestic capital market to global investors. He emphasized that robust liquidity, often referred to as a “deep market,” is an absolute necessity for large institutional investors to execute significant positions without inadvertently triggering drastic price surges. This depth allows for smoother and more predictable trading.
“This also significantly increases the chances for domestic issuers to be included in or raise their weighting within prestigious global indices like MSCI and FTSE, which will automatically trigger passive fund inflows,” Wafi added. Such inclusions can bring substantial capital and international recognition to Indonesian companies, diversifying their investor base.
For context, the OJK officially sanctioned the amendments to Regulation 1-A proposed by the Indonesia Stock Exchange (BEI). A pivotal aspect of this revision is the progressive increase of the minimum free float for listed companies to 15%. This strategic adjustment underscores a commitment to deepening market liquidity and enhancing corporate governance.
Hasan Fawzi, Chief Executive of Capital Market, Derivative Financial, and Carbon Exchange Supervision at OJK, confirmed the approval, noting that it was granted with several specific adjustments. “We just approved the changes to Regulation 1A today, which had been submitted by the exchange. One of its key provisions is to gradually increase the minimum free float to 15%,” he stated in Jakarta on Wednesday (25/3/2026).
Hasan also indicated that this new regulation is targeted to become effectively enforceable before the end of March 2026. He reiterated that the fulfillment of the 15% threshold would not be an abrupt requirement but rather a carefully measured, phased process, allowing companies adequate time to adapt and comply without undue disruption.
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