Newsletter
REFORMS TO BLOCK TRADING SYSTEM
To promote block trade, and to allow investors to apply greater flexibility in their trading strategies, the Taiwan Stock Exchange Corporation (TSE) has phased in a number of adjustments to its system for block trading, which are outlined below. The changes are expected to facilitate acquisition of shares in companies listed on the TSE and traded on the GreTai Securities Market (OTC market).
‧Additional off-market trading period for paired trades
Previously, paired trades could be made during two periods during market trading, and one period after the close of market trading. An additional off-market trading period for paired block trades is now available prior to the start of market trading hours from 8:00 to 8:30 a.m. Information on transactions completed during this period will be disclosed collectively after the start of market trading at 9:00 a.m.
‧Tick size for block trades
Previously, the price range for block trades was 3.5% above and below the block trade reference price, and the price increment (up/down tick) was the same as in market trading, i.e. NT$0.1 for prices per share between NT$50 and NT$100, and NT$0.05 for prices between NT$10 and NT$50. The up/down tick is now reduced to NT$0.01 throughout the price range for both paired and non-paired trades. This change will satisfy the need for accurate computation of the total value of completed transactions.
‧Adjusted block trading price range
The price range for both paired and non-paired block trades is now 7% above and below the market opening auction reference price (for the majority of securities, the previous day's market closing price), which is the same as the price range for market trading.
‧Block trade thresholds reduced
In the past, the minimum quote per trade for paired block trades was at least 1000 trading units or a monetary value of at least NT$30 million for a paired trade in a single stock; and at least five different stocks and a total monetary value of at least NT$30 million for a paired trade in a basket of stocks. The minimum bid or ask quote is now reduced to 500 trading units or a monetary value of at least NT$15 million for a paired trade in a single stock; and at least five different stocks and a monetary value of at least NT$15 million for a paired trade in a basket of stocks. Since these minimums are now the same as for non-paired trades, this change will allow more investors the opportunity to participate in paired block trades, and hence, avoid free-riding risk.
‧Sale of borrowed securities permitted in block trading
The previous rules did not allow the sale of borrowed securities in block trades. To allow greater flexibility in the block trading mechanism, in order meet block traders' demands for diversity in trading, the TSE has allowed the borrowing and sale of securities in block trades from 28 July 2008. If securities held by an investor do not meet the criteria for block trading, the investor can use securities borrowing transactions to obtain sufficient securities to conduct a block trade.