In order to reflect the demands of the market, and to be in line with international systems, the Financial Supervisory Commission announced that the price variation limit will be increased from 7% to 10% on June 1st, 2015. Account collateral maintenance ratio of margin trading has been adjusted to 130% since May 4th, 2015.
The current 7% price variation limit has been in place for many years. There are no price variation limits in major markets in Europe and the United States. Even in new markets such as Malaysia, Thailand, and Shanghai, the price variation limits are set at 10%-30%. Stock prices are nominally decided by company value and the prices acknowledged by buyers and sellers. As the current market has matured, many products, such as warrants, have not been limited by a 7% price variation, and for newly listed common stocks in their first 5 days of listing and foreign ETFs, there are no price variation limits. Besides, investors may invest abroad, or by sub-brokerages through domestic securities firms, buy and sell foreign securities with lax price variation limits of their own accord.
The increase of the price variation limit to 10% will facilitate stock price responsiveness and improve market efficiency, and can be considered a measure to reflect the demands market, to increase returns in the market, and to be in line with international systems.
Under the current transaction system, many parameters are modeled on the 7% price variation limit. In addition to the increase of the price variation limit to 10% for stocks traded during the general trading period, other products and transaction methods will also be simultaneously adjusted. The corresponding adjusted measures are divided into three categories including "modestly adjusted connected items relevant to price variation limit," "risk control enhancing measures" and "marketing stability maintaining measures"; and explained and summarized as follows.
Modestly adjusted connected items relevant to price variation limit：
Risk control enhancing measures：
Marketing stability maintaining measures：
Note：The above documents have been translated by the Linguitronics Co., Ltd. The English translation is for reference only. In case of any discrepancy between the English version and the Chinese version, the Chinese version shall prevail.