The interdiction would be replaced with a rule that such shareholders can not sell more than one percent of the company within any three-month period, the China Securities Regulatory Commission said in a statement on its website.
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The mainland’s securities regulator has announced new rules for major shareholders wanting to sell stocks on the secondary market in a bid to prevent a punishing sell-off in an already battered stock market.
China’s circuit breaker mechanism follows the Hushen 300 Index, which reflects the performance of bluechips listed in Shanghai and Shenzhen.
Those who want to reduce their holdings have to publicize their plans 15 trading days beforehand, it said. If the 5% up or down happens after 14:45 or the 7% threshold is triggered at any moment, the trading will be halted until the end of the session.
The new rules will come into effect on Saturday, a day after the earlier ban is set to expire.
China’s CSI 300 Index plunged 7.2% on Thursday, triggering an automatic shutdown within 30 minutes of the open, as declines in the yuan rattled investor confidence in the world’s second-largest economy.
Unlike the trading-curb system in-place on the markets in NY, which slows down the flow of trades during high-volume sell-offs, the Chinese circuit-breaker shuts down trading completely.
Hong Hao, chief analyst with the Bocom International, said the CSRC was trying to calm investors by removing a big selling pressure, but the rules alone would be “useless” in preventing market falls, as the biggest concerns were now focused on the new circuit breaker mechanism, first used on Monday.
According to the rules, “institutional investors that built large stakes in the market over time will not be restricted in their sales”, said Oliver Barron, China Head of Analysis at China-focused investment bank NSBO.
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China’s benchmark Shanghai index tumbled 7.32 percent on Thursday morning before trading was halted for the rest of the day under a new “circuit breaker” mechanism created to lower market volatility. “It may take a couple of weeks for the dust over this “short-circuit’ incident to settle”.
