Block trading rules may be eased

The Securities and Futures Bureau is planning to relax block trading rules as part of the government's efforts to develop Taiwan into a regional fundraising and asset management center, an official said yesterday.

"We are considering loosening the block trading regulations" to make the mechanism more accessible for institutional investors, Wu Tang-chieh (吳當傑), the bureau's director general, told reporters at the sidelines of a preparatory meeting of the Economic Sustainable Growth Conference yesterday.

Block trading refers to a large amount of securities being traded, typically at least 10,000 shares of stock. It is usually a privately negotiated transaction executed apart from the public auction market, either during or after the exchange's trading hours, by institutional investors.

The bureau is considering widening the daily trading limit on block trading to somewhere between the current 2 percent and the 7 percent ceiling on the public exchange, as well as lengthening the 10-minute trading time of each block trading session, Wu said. A total of three block trading sessions are held during and after the bourse's trading hours.

The bureau also plans to strengthen the bid and offer matching mechanism to ensure that the buyer and the seller can carry out the privately negotiated deal without third-party intervention, Wu said.

Investors may be granted one more day to settle their block trades, Wu said. They are currently required to pay on the same day that the transaction is completed.

The relaxation is expected to benefit foreign investors interested in forming strategic partnerships with local companies, as they often utilize block trading as a way of acquiring the target company's shares, Wu said.

The issue was raised by Sean Chen (陳沖), chairman of Taiwan Cooperative Bank (合作金庫銀行), which is widely rumored to be in talks with BNP Paribas Group for a strategic alliance. The French banking giant is reportedly planning to acquire an 8 percent stake in the state-controlled bank. The Taiwanese bank declined to comment on the alleged deal.

The proposed relaxation on block trading was one of the consensus issues reached at the meeting. Other proposals, including forming a more consistent policy governing taxation of financial products, strengthening corporate governance and supervision of capital markets to prevent financial crimes, also received a positive response in the financial group discussion.

As expected, proposals to ease the restriction on China-bound investments, currently capped at 40 percent of a company's net value, came under heavy debate.

Supporters of the lifting of the ban like People First Party Legislator Christina Liu (劉憶如) and Chiang Chao-kuo (江朝國), director of the Department of Law at National Taipei University, argued that the restriction was the major barrier to overseas Taiwanese companies' willingness to launch their initial public offerings (IPOs) back in their home market, which in turn discourages foreign funds from investing in these firms.

Liu said that the number of companies that conducted IPOs in Taiwan shrank to 11 last year, only one-third of the number in 2004.

Meanwhile, opponents of the easing of the restriction, like Taiwan Solidarity Union Legislator Lo Chih-ming (羅志明) and Huang Shih-hsin (黃世鑫), dean of Public Affairs College at National Taipei University, argued that the cross-strait opening-up falls under the president's authority, and that the risks of concentrating Taiwanese investment in a hostile country remained high.