Shanghai Stock Exchange Take Measures To Prevent Speculation On New Shares

With a view to implementing the requirements of deepening new share issuance system reform of the China Securities Regulatory Commission (CSRC), the Shanghai Stock Exchange (SSE) has carried out a series of supervision measures to prevent the speculation on new shares, for the purpose of curbing over-speculation on new shares. Recently, the SSE has imposed oral or written warnings on the accounts with abnormal trading of new shares, the measure of in-session suspension of trading on the very day on several accounts with serious abnormal trading of new shares and the disciplinary punishment of 3-month trading restrictions on the securities account with its owner surnamed Huang seriously violating relevant regulations in the trading of news shares such as those in Yechiu Metal Recycling (China) Ltd. (Yechiu Metal), People.cn Co., Ltd. (People.cn) and Beijing Cuiwei Tower Co., Ltd. The SSE has cracked down on new share speculation by strengthening the measures on regulating the whole process of new share trading.

First of all, the SSE released new regulations of preventing speculation on new shares and provided the basis.

Based on the practical experience and empirical research on the supervision on the new shares trading, the SSE issued the "Notice of Toughening Supervision on Trading at Preliminary Stage of New Shares Listing" and the "Notice of Strengthening Supervision on Clients' Trading Behaviors at Preliminary Stage of New Shares Listing" on March 8.

The above two "Notices" perfected the system of in-session temporary trading suspension on new shares on the first day of listing, strengthened the regulatory measures on new share trading and defined the abnormal trading behaviors for new shares, thus providing the behavior guideline and supervision basis for all market participants. At the same time, in a bid to urge its member units to attach importance to the management on preventing speculation on new shares, the two "Notices" further strengthened the member units' responsibilities for cooperative management and confirmed the roles and responsibilities of member units in the cooperative management of new shares.

Secondly, multiple regulatory measures have been adopted to crack down on new share speculation.

With an aim of further tightening its crackdown on new share speculation, the SSE had more pertinent supervision on the accounts committing new share speculation after systematically sorting them and shortlisting them as key supervised objects. Concerning the in-session abnormal trading for new shares, the SSE notified the market of regulatory information in time by oral reminder, written warning and other ways. With regard to the accounts frequently involving speculation on new shares, the SSE decisively adopted measures including in-session trading suspension on the very day, restricted trading and report to the CSRC for punishment. For example, at the end of February, the SSE restricted the trading of the accounts committing new share speculation, such as those with their owners surnamed Huang and Su, and reported some accounts committing new share speculation to the CSRC for investigation.

After issuance of "Notices", as of May 10, a total of 8 new shares had been listed on the SSE, among which 4 new shares such as those in Yechiu Metal and People.cn had met the conditions for in-session temporary trading suspension. The SSE immediately adopted a series of supervision measure on the securities accounts having abnormal trading behaviors for new shares, with an aim of curbing speculation on new shares.

Thirdly, efforts have been made to strengthen the media publicity on preventing new share speculation and notify the risks in new share speculation.

In the recent serial activities such as the special lecture themed "Guidance for Rational Investment", by giving typical cases related to new share speculation, the SSE cautioned investors that irrational investment behaviors including the speculation on new shares are one of the important reasons for the investors' losses. Meanwhile, the SSE constantly reinforced the media publicity on preventing speculation on new shares by publishing articles about preventing speculation on new shares in major newspapers, magazines and financial websites, in a bid to remind investors of risks in new share speculation.

In addition, the SSE also strengthened the information disclosure of transaction features of new shares on the first day of listing and promptly utilized media to disclose the actual transaction situation where the proportion of shares purchased by big individual investors declined drastically while small and medium-sized investors played a leading role in the purchase of shares on the first day of listing of new shares like those in Yechiu Metal and People.cn, with an aim of helping investors better understand the risks in participating in the new shares trading.

According to the SSE, it will prevent and curb the new share speculation by earnestly toughening the implementation of the two "Notices". At the same time, it will continuously study the optimization on the transaction mechanism at the preliminary stage of new shares listing, strengthen the suitability management on investors of new shares and perfect the long-acting management mechanism for investors to participate in the trading of new shares, for the purpose of leading the market to rationally engage in the trading of new shares.