President Zhang Yujun of the Shanghai Stock Exchange (SSE) pointed out at the "Lujiazui Forum 2008" that a new concept of stock allotment by block trading platform should be introduced, and the trading system should be reformed so that institutions may have inquiry and quotation functions in the allotment. Moreover, securities dealers often taking part in block trading should be regarded as primary dealers to play a more important role on the market.
Zhang also said that the leapfrogging development of China's capital market relied on the development of the investment institutions and the innovation of trading system. With the great impact of "big/small non-tradable stocks" on the market, the innovation and development of China's capital market should be achieved through forcefully developing investors' group and continuously improving the existing block trading platform.
"In the past, the stock market was led by retail investors, with the actual traded shares in relative small quantity and the equity trading in small scale." Zhang said, with the progression of the equity division reform, the market had transformed from a limited floating market to a complete floating one, revealing the drawbacks of the retail investor market. In particular, the ban-lift of "big/small non-tradable stocks" this year had great impact on the market. On the contrary, the overseas stock markets were characterized by institutional investors' ruling over the market and a vigorous blocking trading platform. Now, the block trading platforms, which the SSE and the Shenzhen Stock Exchange (SZSE) had established, could hardly be brought into full play for the ban-lift of "big/small non-tradable stocks".
Zhang said one of the targets of the issuance of the "Guidance Opinion on Transfer of Stock Shares with Terminated Sales Limit of Listed Companies" by the China Securities Regulatory Commission (CSRC) and the "Guidance on Non-tradable Shares Transfer through Block Trading System" by the SSE was to forcefully develop institutional investors and form an effective and fully functional institutional market so as to perfect the block trading platform with higher efficiency. He hoped that the shareholding lessening of more than 1.5 million shares should also be performed through the block trading system besides the "big/small non-tradable stocks" exceeding 1% of the total shares of a company stipulated by the CSRC. It was learned that the SSE has adjusted the trading mechanism of block trading platform, leading to flexible quotation methods and large decrease of trading costs.
Regarding the function of block trading platform, Zhang pointed out that a new concept of stock allotment by the block trading platform should be introduced. Besides, the trading system should be reformed so that institutions may have inquiry and quotation functions in the allotment. Moreover, securities dealers often taking part in block trading should be regarded as primary dealers, serving as both the supplying and the demanding party of the market to play a more important role on the market.
Zhang said these measures were to achieve two aims. In the short term, they are expected to effectively alleviate the pressure of the shareholding lessening of "big/small non-tradable stocks". Shareholding lessening through the block trading platform will bring more stable forecast to the investors and decrease the impact pressure or impact cost of the market. In the long term, hopefully the transformation from private to institutional investment market could be realized through the development of qualified investors. Also, a platform for the supplying and demanding parties of stocks should be formed to establish a good joining mechanism by organizing supply and demand. Therefore, the block trading market could precisely serve for the pricing and trading of block shares, adding more dynamics to the market.