New rules to limit big shareholders’ stock selling

Some analysts said the rules were less draconian than expected, as the restrictions do not apply to shares acquired in the secondary market, or share sales outside the exchanges’ bidding system, such as block trades, or negotiated transfers.

A similar price plunge Monday triggered a sell-off on Wall Street and other global markets.

They even made some changes to the rules, including shortening the length of the first halt from 30 minutes to 15 minutes, before implementing them for the first time on Monday. In the United States, trading is halted temporarily after declines of 7% and 13% in the Standard & Poor’s 500 Index, and only suspended for the rest of the day if the losses reach 20%.

The sell-off was in part due to fears that a regulatory ban on share sales imposed during last year’s summer rout will expire on Friday.

The benchmark Shanghai Composite Index fell 7.3 percent to 3,115.89. Regulators announced this week that to avoid fueling further volatility, such sales will be limited to private transactions.

“This mechanism, as per the Chinese regulation body, aims to reduce A-share volatility”, Citigroup Hong Kong-based strategist Jason Sun wrote in a report.

Chinese leaders had encouraged the public to buy in hopes of raising money to overhaul state industry.

On July 8 in the midst of a major equity market meltdown, Beijing said company shareholders with more than 5% stake can’t sell for 6 months. The ban on new IPOs was lifted in November.