Name: Guidelines on the Procedures of the Shanghai Stock Exchange Concerning Auction Through the Block Trade System (Trial) (《上海证券交易所大宗交易系统专场业务办理指南(试行)》, the “SSE Guidelines”)
Issuing authority: Shanghai Stock Exchange (“SSE”)
Effective date: 27 May 2008 Subject: Auction through the SSE block trade system
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”) to regulate the sale of large volumes of listed shares released from sale restrictions imposed under share reform (“Unlocked Shares”). The SSE implemented the CSRC Guiding Opinion by issuing a circular and the SSE Operational Guideline on 22 April 2008 and 23 April 2008 respectively, setting out the detailed procedures in relation to the transfer of Unlocked Shares through the block trade system. The SSE further issued the SSE Guidelines on 27 May 2008 to clarify the mechanism for the sale and purchase of Unlocked Shares and other shares through its block trade system. It appears that the regulators are attempting to expand the functions of the block trade system, as the mechanism for the sale and purchase of shares through the block trade system also covers shares other than Unlocked Shares.
Highlights
- The SSE Guidelines provide that auction through the block trade system shall be conducted as follows: (i) a seller or purchaser of shares (the “Trader”) shall entrust a qualified agent to commence the auction by making an offer to sell or buy; (ii) the agent applies to the SSE to initiate the auction; (iii) following a review as a matter of formality, the SSE will announce the relevant information for the auction, such as timing, name of the agent and any special instructions from the Trader, and organise the auction for the bidding between the Trader and the potential counterparties; (iv) once the Trader and a counterparty have agreed on a trade, they submit the required information in relation to the trade via the block trade system for announcement by the SSE.
- SSE members with securities brokerage qualifications may provide agency services to qualified investors. Certain institutional investors, such as insurance companies, trust companies and QFIIs, may apply to become a “qualified investor” if they are able to obtain recommendation from any SSE member. SSE members with securities underwriting qualification may provide rights issue and public offer services to Traders.
- Disclosure requirements applicable to the participants of block trading are clarified in the SSE Guidelines. For example, shareholders of any listed company which has completed the non-tradable share reform with at least 5% shareholding are required to make a public announcement for any change in shareholding amounting to 1% .
- Qualified investors and SSE members are subject to sanctions, including public reprimand and disqualification from participation in further auctions through the block trade system, if they breach any contracts.
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.
