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Shanghai exchange to limit trading halts to five months: state newspaper

A board shows the stock movements inside the Shanghai Stock Exchange in the Lujiazui Financial district of Shanghai on Sept 22, 2015.

[SHANGHAI] China's main stock exchange plans to limit trading suspensions to five months, the official China Securities Journal said on Monday, a move that could help clarify regulations for a practice that's often caused headaches for investors.

Loose regulation of trading suspensions in China came into sharp focus in July when half the firms on the Shanghai and Shenzhen stock exchanges suspended their shares to avoid tumbles during a market crash.

Under current rules, firms can officially request trading halts for periods of between 10 working days and three months, although many find ways to extend the suspensions far longer, allowing them to skirt volatility in the market.

Under the recommended regulations, firms would be allowed to suspend trading for up to three months, and they could apply for only a single two-month extension, the business daily said, citing a statement from the Shanghai Stock Exchange.

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Stock exchange insiders say firms often game the system to suspend trading in their shares. Suspensions normally need to be linked to major restructuring, planned share placements or the pending release of "significant matters".

The China Securities Journal said currently around 13 per cent of trading suspensions are longer than five months, while around 60 per cent last less than three months.