According to a resolution by the economic task force under the Executive Yuan yesterday, unlisted shares will be traded through licensed brokers from the beginning of next year.
The proposal -- made by the Ministry of Finance to the task force -- is scheduled to be launched beginning on Jan. 1.
Currently, unlisted shares, also known as gray-market shares, are traded through illegal -- though tolerated -- underground brokers.
According to finance officials, after Jan. 1 unlisted shares will be traded through licensed brokers in a market that will be open from 9am to 3pm, Monday through Friday.
There will be no limit on the price movement of unlisted shares. As to brokerage commissions, the rate is tentatively set at a ceiling of 0.5 percent, though the actual rate will be negotiable. The new measure is aimed at preventing the gray market from trading unlisted shares, officials said.
In order to minimize investment risk for unlisted shareholders, the task force has decided not to legalize underground brokerages but instead require them to become legitimate brokers. The minimum capital requirement for a licensed securities company is NT$200 million.
The trading mechanism of the gray market will be on the basis of negotiation between buyers and sellers in the market.
The Taiwan Stock Exchange, which uses a centralized trading system, contains no negotiation between buyers and sellers. Instead, every buyer and seller offers a price to buy or sell listed shares. When the bid and offer price are matched, a deal is completed.
In the unlisted share market, since there is often not enough buyers or sellers, a securities broker or dealer maintains an inventory of certain shares. When an investor wants to buy a share, the broker acts as a seller.
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