CSRC reacts to intraday trade rumors

At a press conference held Friday, the China Securities Regulatory Commission (CSRC) refuted recent rumors that it was on the verge of reinstating intraday stock trading, a practice which it banned over 18 years ago.

A representative from China's top securities authority explained to the media that there are currently no laws blocking intraday stock trading - that is, the purchase and sale of a stock within same day - yet the commission still has not expressly approved such trades either. Amendments made to Chinese securities laws in 2005 deleted prohibitions against same-day trading, said the CSRC spokesperson, who declined to comment on if or when such transactions might make their return to local bourses.

Currently, investors purchasing equities in the Chinese mainland market have to wait until the following day to sell them.

The subject of same-day transactions resurfaced for many investors in March, when Gui Minjie, chairman of the Shanghai Stock Exchange (SSE), reportedly told the China Securities Journal that authorities were studying intraday, or T+0, trading. Since then concerns about liquidity conditions at local exchanges, signs of increased regulatory emphasis on innovation in the financial markets, and the reintroduction of government bond futures trading after a similarly lengthy ban, have reignited speculations that same-day processing may soon make a comeback. Until late last week though, the CSRC had offered no official response on the matter.

"Authorities need to evaluate and make sure that such trades will not exert too much of a negative impact on local markets," Zhao Xijun, deputy director of the Finance and Securities Research Institute at Renmin University of China, told the Global Times Sunday.

Eliminating time constraints on stock transactions would not only make it easier for investors to readjust their positions, but, in theory, it could also help boost liquidity by allowing investors to move their capital more freely, Zhao remarked.

But Zhao also warned that individual investors without professional backgrounds in finance could suffer major losses as a result of this practice, since same-day trading would likely promote speculation and ratchet up volatility at mainland boards.

The SSE and its counterpart in Shenzhen introduced intraday trading in 1992 and 1993 respectively. In 1995, authorities put the brakes on such trading and introduced next-day processing after hot money flows led to drastic price fluctuations among yuan-denominated equities.