Shenzhen bourse plans hard rules on stock trade

Shenzhen bourse plans hard rules on stock trade

The Shenzhen Stock Exchange plans to limit trading of stock accounts to prevent irregularities such as boosting share prices via related accounts or issuing false analyst reports, according to draft rules yesterday.

The Shenzhen bourse will also restrict trading of accounts held by people who are being investigated by the authorities for financial wrongdoing under an earlier notice issued by the China Securities Regulatory Commission, according to the rules obtained by Shanghai Daily yesterday.

The exchange sent the draft rules yesterday to member brokerages which will give their opinions until next Friday. It didn't specify when the rules would take effect.

Under the proposed rules, the Shenzhen bourse can freeze stock accounts or limit their buy or sell activities for as long as 15 days if "significant irregular trading" occurs.

Such irregularities include trading a large chunk of stocks of a firm before it releases price-sensitive information, using several stock accounts to jack up stock prices and making unreasonable trade orders to manipulate turnover.

The draft rules also provide for securities-industry participants who trade stocks in an apparently different way from their analysis or public suggestions to be barred from trading.

A stock account can be frozen if initial warnings by the bourse to those severely violating trading rules fail to curb such misbehavior.

An investment frenzy by domestic investors have nearly tripled the value of Chinese yuan-backed equities since the start of 2006, fueling government concerns over rising speculation and overheating in the market.

Early this year, the CSRC began to battle against stock-market insider trading and manipulation as part of stepped-up efforts to prevent such misconduct from hurting investor confidence.

The regulator has taken action against a fund manager, a stock analyst and several senior executives at domestically listed firms since early last month for insider dealings or misleading investors.

The Shanghai Stock Exchange has also suspended trading of three individual stock accounts since late April, which were allegedly involved in manipulating prices.