Taiwan OTC Market's 'Trading Suspension' Slims Down After One Week: Reveal of '2-Minute Matching' Benefits

Since the GreTai Securities Market (GTSM) first introduced its 'Public Warning and Trading Restrictions' regulations in 1996, it has now reviewed and updated the system in response to this year’s surge in market volume and prices. After a comprehensive review initiated at the beginning of the year, the revised rules officially took effect on August 10.

The core changes focus on shortening restriction durations, optimizing order-matching frequency, and revising price spread thresholds for high-priced stocks. At a press conference today (19), GTSM Deputy General Manager Li Shu-Nuan explained that the new 2-minute matching interval was designed to align with the existing 'Instant Price Stabilization Mechanism.' This ensures cooling-off periods while increasing trading opportunities for restricted securities.

Under the new rules effective August 10, any ordinary listed security placed under trading restriction—whether for the first time or again—will now undergo batch matching approximately every 2 minutes, down from the previous 5-minute or 20-minute intervals.

Li explained that the prior matching frequency had remained unchanged for over a decade. The adjustment to 2 minutes reflects current market conditions, including index levels, foreign investor participation, and the shift toward continuous trading. The 2-minute window matches the existing stabilization rule: when the proposed match price deviates by more than 3.5% from the last traded price, trading pauses for 2 minutes into a call auction. This duration is familiar and acceptable to investors, allowing more orders to accumulate and facilitating fairer price discovery.

Restriction periods have also been significantly shortened:

- General restrictions: Reduced from 10 business days to 5, whether first-time or repeated. - Day-trading ratio excessive: For stocks flagged due to high day-trading volume, the restriction period drops from 12 to 7 business days.

Regarding impact on market liquidity, Li noted that reduced trading volume during restrictions is expected, as the mechanism aims to cool overheated activity. However, preliminary data shows no significant difference in turnover between old and new systems. Volumes typically return to normal after the restriction ends, depending on stock popularity, fundamentals, and investor sentiment.

The so-called 'High-Priced Stock Price Spread Clause' (Item 11 of Public Warnings) has also been substantially revised:

- Base threshold: Stocks priced above NT$1,000 now require a price swing of at least NT$300 over the past six trading days to trigger a warning (previously only NT$70). - Tiered adjustment: For stocks above NT$2,000, each additional NT$1,000 tier increases the required spread by NT$150 (previously NT$15 per NT$300 tier).

These adjustments reduce the frequency with which high-priced stocks are flagged, enhancing trading flexibility. GTSM has added educational links and pop-up menus on its website to clarify the revised restriction details and assist investor understanding.

Since implementation on August 10, GTSM will continue monitoring the effectiveness of the new rules and has established a semi-annual review mechanism to adapt to domestic and international developments, ensuring fairness and transparency in market operations.