Newsletter
AMENDMENTS TO OTC TRAD-ING RULES
On 28 September 2001, the Securities and Fu-tures Commission (SFC) amended the Regula-tions Governing Securities Trading on Over-the-Counter Market to extend the applica-tion of the regulations to the stock of non-listed public companies and provide lawful trading mechanism to better protect investors.
Accordingly, securities that may be traded on the OTC market now include "emerging stock." "Emerging stock" refers to shares issued by non-listed public companies that meet certain criteria, and registered with OTC Center. The issuer of emerging stock must enter into an agreement with OTC Center, and OTC Center must report to the SFC the execution of such agreements, and the termination, suspension or resumption of trading of such stock. The draft criteria have been prepared by OTC Center and are now reviewed by the SFC.
According to the draft criteria, a non-listed pub-lic company wishing to register with OTC Center must (1) be in the course of preparation for TSE or OTC listing under the assistance of a securi-ties firm; (2) be recommended by at least two securities firms; and (3) have appointed a spe-cialist stock agent to handle its stock matters, provided that if the company is engaged in the business of securities, futures, banking and fi-nance or insurance, a letter of consent from the competent authority must be obtained before OTC Center will consider its application. If the application documents are complete and the above criteria are met, OTC Center will approve its application and post the particulars of the company (including its name, paid-up capital, business scopes and main products) on the web-site of OTC Center for five business days. The registered emerging stock will then start trading on the sixth business day. If the company issues new shares of emerging stock, the new shares may be traded on the OTC market from the day they are delivered to the subscribers. The draft also requires disclosure by the issuers of the emerging stock, including to submit financial statements at regular intervals and input basic information and important news of the company in the Stock Market Monitoring System.
Under the amendment, trading of emerging stock will be conducted in a similar way to the OTC listed shares. For example, emerging stock will be traded on a cash-only basis; trading hours will be from 9:00 a.m. to 1:30 p.m., with after-hours trading from 2:00 p.m. to 2:30 p.m. at the closing price of the same business day. Trading of emerging stock prices will be quoted at the price per share; the minimum trading volume is 1000 shares, and the trading quantities must be at least for 1000 shares or any multiple of 1000 shares.