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Ban on share sales at less than closing prices to be lifted

The government will scrap a ban on shares being sold at prices lower than their latest closing prices, beginning on May 16, financial regulators said yesterday.

The decision was made at a meeting of officials from the Financial Supervisory Commission, the Securities and Futures Bureau and the Taiwan Stock Exchange Corp yesterday.

"We decided to ease the ban on shares being sold at prices lower than their latest closing prices," Wu Tang-chieh (吳當傑), head of the Securities and Futures Bureau, told reporters after the meeting.

The new regulation will initially apply only to stocks listed on the Taiwan 50 Index, Wu said.

The Taiwan 50 Index, which accounts for nearly 50 percent of the TAIEX's turnover, includes a variety of heavyweight stocks like Taiwan Semiconductor Manufacturing Co (台積電), United Microelectronics Corp (聯電), Cathay Financial Holding Co (國泰金控) and Formosa Petrochemical Corp (台塑石化).

As part of the supporting measures to make this relaxation possible, Wu said that financial regulators yesterday agreed to raise the collateral maintenance ratio for margin trading from 120 percent to 140 percent.

The bureau will review a draft submitted by the stock exchange regarding this measure before formally implementing the scheme sometime after May 16, he added.

During yesterday's meeting, financial authorities also agreed that the plan to loosen the daily limit on stock-price fluctuations to 15 percent from the current 7 percent will be implemented by the end of September, Wu said.

The commission last week said it hoped the stock exchange could complete a draft of supporting measures relevant to the trading-limit change in August before submitting the draft to the Cabinet for the final decision.

As for the proposed "circuit-breaker" system, financial regulators said they will stick to their original plan to implement the system in September.

To avoid panic selloffs by investors, the circuit-breaker system comes into effect when the stock index falls by a predetermined amount, say 10 percent. Trading on the stock exchange will be temporarily suspended, giving investors time to calm down.
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