Name: Operational Guideline of the Shanghai Stock Exchange for the Transfer of Shares Released from Sale Restrictions on the Block Trade System (上海证券交易所大宗交易系统解除限售存量股份转让业务操作指引, the “SSE Operational Guideline”)
Issuing authority: Shanghai Stock Exchange (“SSE”)
Effective date: 23 April 2008
Subject: Transfer of shares of listed companies
On 20 April 2008, the CSRC issued the Guiding Opinion on the Transfer of Shares of Listed Companies Released from Sale Restrictions (the “CSRC Guiding Opinion”) with a view to mitigating the impact on the secondary market of large sales of listed shares released from sale restrictions imposed pursuant to share reform (“Unlocked Shares”). Soon after, the SSE issued a circular on 22 April 2008 to implement the CSRC Guiding Opinion (the “SSE Circular”), and on 23 April 2008 issued the SSE Operational Guideline which sets out detailed provisions on operational matters relating to the transfer of the Unlocked Shares on its block trade system.
Under the CSRC Guiding Opinion, the sale of Unlocked Shares exceeding 1% of the total issued shares of a listed company within one month must be conducted through the block trade system of a stock exchange. The SSE Circular further encourages the sale of Unlocked Shares below 1% of the total issued shares of a listed company but which reaches or exceeds 1.5 million shares to also be conducted through the SSE block trade system. More significantly, the SSE has extended the function of its block trade system from a pure trading platform to one which enables securities brokers to offer underwriting services.
Highlights
- The SSE block trade system is set up for the conduct of the following transactions: (i) the sale of Unlocked Shares exceeding 1% of the total issued shares of a listed company within one month, (ii) the sale of Unlocked Shares below 1% of the total issued shares of a listed company but which reaches or exceeds 1.5 million shares, (iii) the issue of securities to “qualified investors”, and (iv) other transactions which are approved by the CSRC or recognised by the SSE.
- SSE members and qualified investors are permitted to directly participate in the SSE block trade system, while participation by other investors is required to be conducted through an SSE member. Subject to SSE approval, institutions which may apply to become a “qualified investor” are as follows: (i) insurers and insurance asset management companies, (ii) trust investment companies, (iii) social security funds, enterprise pension funds and pension funds management institutions, (iv) qualified foreign institutional investors, (v) finance companies, (vi) state-owned asset operation institutions or authorised institutions, (vii) investment and asset management companies, and (viii) other investors recognised by the SSE.
- The SSE block trade system allows its participants to engage in price inquiry, price negotiation and price bidding within certain parameters.
- The trading price on the block trade system for securities with daily price limits is determined by the parties and this price must be within the price limits on the trading date. For securities without daily price limits, the trading price to be determined by the parties must not be 30% above or below the immediately preceding closing price of such securities, or must fall within the highest and lowest trading price of such securities on the trading date.
- Qualified investors are permitted to engage SSE members to provide underwriting and related services in connection with their sale of new shares and Unlocked Shares. Price inquiry for such sale is permitted after the close of market on the day immediately preceding the transfer date of such shares.
Please contact Zili Shao ( zili.shao@linklaters.com tel: +86 21 2891 1868) or Fang Jian ( jian.fang@linklaters.com tel: +86 21 2891 1858) if you would like further details.
