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To implement the prompt reaction mechanism of joint supervision over information disclosure and abnormal fluctuation of stock prices, the Shanghai Stock Exchange (SSE) has recently worked out the "Notice of Further Strengthening Supervision over Information Disclosure and Abnormal Fluctuation of Stock Trading". The notice has been approved by the China Securities Regulatory Commission and will become effective as of September 1.
ccording to an SSE official, since the second half of 2006, the short-term scalping, insider dealing and excessive speculation on ST stocks have seen a constant increase, together with the increasingly active trading on the securities market and the rising of individual stocks' prices. To curb these irregularities, effectively prevent market risks and maintain market order, the SSE worked out the notice in accordance with the "SSE Trading Rules" and the "SSE Stock Listing Rules".
The notice covers three rules. Firstly, the SSE will target abnormal fluctuations when trading prices of stocks without trading limit surge above 100% or drop below 50% of their opening prices on a day. The SSE will have the right to suspend them from trading for up to 30 minutes, with its resumption time pursuant to SSE announcements. It is known that this rule aims to prevent malicious short-term speculation on newly issued stocks (or stocks resuming trading). For example, the stock price of "*ST Sichuan Changjiang Packaging Holding Co., Ltd." jumped 491.9% above the opening price the day they resumed trading.
The second rule is targeted at curbing insider trading. The SSE will have the right to suspend the trading of stocks that touch the maximum (or minimum) trading limits for 2 consecutive trading days and if more than 30% of their total daily turnover comes from one branch office of a securities company but the listed company doesn't disclose any significant events. The stocks can only resume trading at 10:30 on the day after the company makes an announcement. This has happened with Zhejiang Hangxiao Steel Structure Co., Ltd. Hangxiao's turnover from Changjiang Securities' Hangzhou branch accounted for 33.74% and 64.7% of its total turnover on February 12 and 13 when the stock price began to soar.
The third rule will be used to curb investors' excessive speculation on special treatment (ST) stocks since the first half of 2007. As for abnormal fluctuations when ST stocks, *ST stocks or S stocks touch the maximum (or minimum) trading limits for 3 consecutive trading days. The SSE can impose trading suspension on these stocks, which can only resume trading at 10:30 am on the day after the listed companies make announcements. As the information disclosure of ST stocks is pending on the index deviation (±15%) according to the current trading rules, ST stocks aren't required to make disclosure even when consecutively touching the daily maximum trading limit in the rising market in the first half of 2007. Moreover, since the daily trading limit of S stocks was reduced to ±5% in early 2007, some S stocks reached the daily trading limit for consecutive days. Even so, they don't have to make disclosure under the current trading rules.
Meanwhile, the SSE will continue to take measures to strengthen the market supervision in a new situation, better checking irregularities and preventing market risks.
