Dispelling the Full Circulation Myth and Introducing the Orderly Circulation System of Stocks
Some people believe that all issued shares can be freely sold through the open secondary market after the expiration of the restriction period,and this full circulation system is the only way for the development of the capital market.In fact,this understanding is incomplete and even mistaken,and it needs to be dispelled and corrected.There is no international practice as to whether the issued shares can be freely circulated in the public secondary market.Although the capital markets of most countries and regions allow stocks to be sold freely in the public secondary market after the expiration of the restriction period,this is not the case in such countries as the United States which has the most developed capital market,and Canada which is influenced by the United States.After the completion of the reform of equity split in China,the full circulation model was implemented.Although this helps to solve the problem of inconsistency of interests between majority shareholders and minority shareholders,its drawbacks are that as majority shareholders reduce a great deal of their holdings and make too much cashing out,the stock market suffers from severe"loss of blood",the secondary market becomes sluggish,and general investors suffer from heavy losses.The growth rate of new stocks in the stock market is higher than that of new funds,and even a stock market crisis may occur.In the long run,it will also damage the financing function of the stock market.Therefore,China's stock circulation mechanism needs to be reformed into an orderly circulation model.China should distinguish securities into restricted ones and unrestricted ones.Unrestricted securities can be freely traded in the public market.But there are only three paths for the sale of restricted securities:Firstly,they can be freely traded in the public market through registration procedures;Secondly,those restricted securities that meet the registration exemption conditions can be transferred in the open market;And thirdly,restricted securities can be transferred between qualified investors in the private equity transfer market.
restricted securitiesfull circulationresale of securitiesreduction of one's holdingsreform of equity split
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