The Shanghai Stock Exchange ("SSE") has recently enacted and issued the Detailed Rules for Real-time Surveillance of Abnormal Transactions of Stocks on the SSE STAR Market (for Trial Implementation) (the "Rules"), immediately effective from the date of issuance.
Major contents of the Rules, comprised of 42 articles in six chapters, include: 1. setting out specific requirements on improvement to the trading mechanism; 2. detailing the criteria of identifying seriously abnormal volatility; 3. making public the criteria on surveillance of abnormal trading behaviors; and 4. assigning concrete regulatory responsibilities for detecting abnormal trading behaviors. Among others, the Rules provide clarity on a wide range of matters, including the criteria to calculate the range of effective quoted prices, scope of application, conditions under which a temporary trading suspension will be triggered during the trading hours, and length of a trading suspension, and require that the prices quoted on the basis of the market price level shall include the limited protective prices acceptable by investors. Meanwhile, the Rules reveal the criteria on surveillance of 11 types of typical abnormal trading behaviors classified into five groups which are bogus price quotations, intentionally driving up or forcing down stock prices, sustaining the controlled maximum price growth (drop), self-trading (i.e. a transaction in which the seller and the buyer are the same party), unusualness of quotation speed of stocks with seriously abnormal volatility, and qualitatively and quantitatively describe these types of trading behaviors.