A Research On Price And Liquidity Impacts Of Block Trading In China

Compared to ordinary transactions mode, block trading system contains flexiblepricing, low transaction cost and high transactional efficiency. The research of blocktrading in China is very seldom, especially for the empirical research. This paper willdiscuss block trading using the data of block trading platform.This paper uses the event study method and multiple regression analysis toexamine the price impact and liquidity impact of block trading. The results show thatblock trades exhibit different price impact in block purchases and block sells. Beforeblock purchases, the stock price rises obviously, and after block sells, the stock pricedescends obviously; according to total magnitude of shares, this paper divides theblock trading into3groups and finds that there is greater price impact in the groupwith small out share; according to the amount of discount or premium rates, this paperdivides the block trading into5groups and finds that the discount or premium ratesand price shocks are positively related; according to the study on the influence ofblock trades, the results show that, before block trading, the level of stock liquiditywill rise, and the level of stock liquidity will reduce after block trading.At last, the paper makes suggestions to the market regulation, for example, theChinese Securities Regulatory Commission should perfect and propagandize theblock trading mechanism to satisfy their block trades.