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The Shanghai Stock Exchange (SSE) said yesterday it will introduce block trading service starting on January 10 to make stock trading easier and cheaper for institutional investors.
Block trading will be applicable to the yuan-denominated Class-A shares, hard-currency Class-B shares, closed-end securities investment funds and bonds, said the exchange.
The minimum block-trading requirement for A shares is 500,000 shares or a value of 3 million yuan (US$361,446). B shares are 500,000 shares or US$300,000.
Block trading is intended for large-volume stock transactions between big market players who are allowed to negotiate a striking price off the market for stock of listed companies.
By doing so, buyers can purchase bulk amounts at lower costs. Otherwise, the price would be bid up substantially under the normal trading method.
The exchange said the block trading would not be incorporated into the daily index movement, because it is required to be conducted within half an hour after the market closes at 3 p.m.
Stock prices in block trading will be pegged between the intraday high and low, said the exchange, which will charge only 70 percent of the normal commission.
Block trading buyers and sellers would report the deal to the stock exchange after fixing the price, and the stock exchange will then go public on the transaction.
Analysts said the practice will attract more institutional buying and reduce wild market swings, as the service makes it easy for major buyers to find a seller and then buy the shares at a lower price.
"The move will provide a lot of convenience to big investors. For the stock exchange, it is the right time to improve services when China's market gradually opens to the world," said Wu Jie, a Kinghing Securities dealer.
Shanghai has trailed the Shen-zhen Stock Exchange in updating its trading service. The Chinese mainland's other bourse began block trading in February last year.
What the two differ in their block trading rules is that Shenzhen excludes its Hong Kong dollar denominated Class-B shares.
The first block trading occurred last March when Shanghai Jinzheng Information Investment Consulting Co. purchased 19.8 million Class-A shares in the Shenzhen-listed Haikou Agriculture & Industry & Trade Co. from China Galaxy Securities Co. at a price of 6.15 yuan.
(Shanghai Daily January 3, 2003)
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