Shares of three issuers were listed on SME Board on 25 May, 2012, commencing implementation of new IPO rules. The new rules increased allotment for institutional investors in off-line offering, removed requirement for three-month lock-up and allowed free float for all shares so acquired on the first day of trading. The new IPO rules are contained in Management Measures for Securities Issuance and Underwriting amended in line with the CSRC Guidelines for Further Deepening IPO Reform (hereinafter referred to as the “Guidelines”). In response to changes in administration of IPO process, Shenzhen Stock Exchange has released three follow-up measures aimed at curbing first-day speculation, inducing rational pricing and maintaining order in trading newly-listed shares. First, the SZSE released “Notice on Further Optimizing the Temporary Trading Halt Mechanism for Newly-listed Shares during First-day Trading”, highlighting trading halt mechanisms. First, according to the measure, a new fluctuation mark of 20% above or below the opening price is set as a trigger for trading halt. (1) If price fluctuation during intraday trading reaches or exceeds 10% above or below the opening price for the first time, trading will be suspended for one hour and risk alert of possible speculation will be issued to investors. If price fluctuation during intraday trading reaches or exceeds 20% above or below the opening price for the first time, trading will be suspended till 2:57 pm, when closing auction begins. (2) If turnover rate reaches or exceeds 50% during intraday trading, trading will be suspended for one hour. SZSE released “System for Temporary Suspension of IPO Stocks on First-day of Trading” on 8 March, 2012. Positive results have been recorded ever since. The price of the 45 IPO stocks listed on the SZSE since 8 March rose 21.82% on average on the first day of trading, which is obviously lower than the previous level. In response to the public concerns over shortened trading time for IPO shares on their first trading day, SZSE refined some trading-halt triggers such as price limits and turnover ratio. This adjustment is part of consistent efforts to explore and optimize existing trading halt mechanisms based on sound appraisal and extensive public consultation. Second, SZSE released guidelines to enhance regulation over trading of newly-listed shares. Guidelines for Monitoring Abnormal Trading Behaviors in Periods Immediately after Listing (draft) covers the following points: specifying definitions of abnormal trading behaviors on first-day and subsequent trading, clarifying specific regulatory measures to enhance transparency of SZSE’s regulation and procedures, offering evaluation standards for member firms’ performance in managing their clients’ behaviors in new-share trading and corresponding monitoring standards. Third, SZSE offers further guidance for investors to rationally invest in IPO stocks and urge members to intensify efforts in investor suitability management during periods immediately after listing. By drawing on experience of investors suitability management on the ChiNex market, the SZSE requires members to help raise their clients’ awareness of compliance in their participation in IPO stocks trading, emphasize risk alerts and education, and further enhance self-regulatory mechanism concerning trading of IPO stocks. Supply of free float of newly-listed shares has increased after promulgation of the Guidelines. Having taken this into account, the new regulatory measures aim to foster long-term mechanism for market self-discipline. However the deep-rooted problem of first-day speculation cannot be resolved overnight. It requires concerted efforts from all parties concerned to cultivate a rational investment atmosphere. SZSE will advance the following measures to curb speculation on newly-listed shares: First, we will further intensify investigation on irregularities in new-share trading, impose stricter penalties and optimize the investor suitability classification management. Second, we will continue to research on the subject of increasing the minimum trade size in the early trading periods after listing. Third, we will increase information disclosure with regards to trading features of IPO stocks, and publish regular statistics on market price changes and investors’ profits and losses in the trading of IPO stocks. |
FTSE Mondo Visione Exchanges Index:
Shenzhen Stock Exchange: Measures To Curb Speculation On First Day Of Trading
Date 28/05/2012