New draft rules for dual share listings

The China Securities Regulatory Commission has proposed new rules for initial public offerings (IPOs), to make it easier for companies to sell shares in the mainland and Hong Kong simultaneously. The changes are expected to coincide with Industrial & Commercial Bank of China's (ICBC) listing in October 2006.

The rules introduce the possibility of a greenshoe option (over-allotment option), which allows a company's underwriters which are selling more than 400 million shares to sell additional shares at the original price if demand calls for it. Generally, the over-allotment will not exceed 15% of the original IPO scale. Greenshoe options can help reduce the volatility of listings and help stabilize share prices, while allowing more investment funds into the market.