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To support implementation of the measures on the reform of new shares issuance of the China Securities Regulatory Commission (CSRC), the Shanghai Stock Exchange (SSE) issued the “Notice of Relevant Issues of Regulation on Trading at Preliminary Stage of New Shares Listing” (the “Notice”) on June 13, 2014.
According to an SSE official, the “Notice” is mainly for the adjustments to the trading mechanisms of price control and in-session temporary trading suspension of new shares on the first day of listing stipulated in the “Notice of Toughening Supervision on Trading at Preliminary Stage of New Shares Listing”, as well as for the amendments to such contents as the abnormal behaviors in new shares trading and their regulatory measures.
Adjustments to the trading mechanisms of new shares on the first day of listing mainly include:
First, it revokes the control measure that “The order price in the last 5 minutes before closing should neither be higher than 120% nor lower than 80% of the opening price”, and the only control measure on order price will be that “The order price during the call auction should neither be higher than 120% nor lower than 80% of the issuance price” and that “The order price during the consecutive auction should neither be higher than 144% nor lower than 64% of the issuance price”.
Second, the rule of implementing the second in-session temporary trading suspension when the share price rises or falls by over 20% during trading is canceled. Instead, trading will be suspended for 30 minutes when the share price rises or falls by over 10% during trading. All this aims to solve the issue of limited time for trading of new shares on the first day of listing.
Besides, amendments to abnormal trading behaviors and their regulatory measures at the preliminary stage of listing of new shares (the first 10 trading days after listing) are mainly as follows:
First, the restriction that a single investor can buy no more than 1‰ of the actual number of new shares floating on the market on the very day is revoked.
Second, quantitative regulations on making orders in a large sum or at high prices, or conducting frequent orders or false orders are stipulated, in order to help investors better understand the abnormal behaviors in trading of new shares specified in the “Notice”, and self-regulate their behaviors in trading of new shares.
According to the SSE official, as speculations on new shares are so common on China’s securities market, the SSE will, according to the requirements of the CSRC, strengthen monitoring on behaviors in trading of new shares. Investors are reminded of rational participation in trading of new shares to avoid unnecessary losses due to blindly following the trend of speculation. As for irrational behaviors in speculations of new shares breaking the rules in the “Notice”, the SSE will take necessary self-regulatory measures according to the seriousness of the violations, or report them to the CSRC for further investigation or punishment.
