Chinese Stock Exchanges to Attempt Liquidity Easing by Reducing Trading Costs

The Shanghai and Shenzhen stock exchanges announced late Aug 10 that they would investigate measures to reduce investors' trading costs and improve liquidity in order to further stimulate the market.

Allowing investors to place smaller orders in auction trading and improving trading mechanisms for exchange-traded funds (ETFs) are among the measures. The exchanges also changed their rules to allow for the faster development of index funds.

The announcements came after top Chinese leaders pledged to "invigorate capital markets and boost investor confidence" at the July politburo meeting, as Beijing struggles to revive flagging economic growth.

They also came after China's securities regulators pushed mutual fund managers to reduce fees in order to cut trading costs.

Shanghai and Shenzhen stock exchange said in identical statements on Thursday that they would "roll out a series of measures to stimulate market vigour, lubricate trading, and increase market appeal."

More specifically, investors trading stocks or listed funds would be allowed to place orders of a minimum of one share, or one unit. Currently, each order must be in blocks of 100 shares or units. Such a change would reduce investors' costs, enable more efficient use of capital, and help improve market liquidity, the bourses said.

In addition, the exchanges said they would study after-hours fixed price trading mechanism for ETFs, which will would reduce price fluctuations.