In 1994, the "Conseil des Bourses de Valeurs" ("CBV") issued a new regulation in order to facilitate the sale of a block of securities in France, and to avoid such sales to occur on non-French stock exchanges and particularly on SEAQ International.
Under this regulation as amended in 1995, the sale of a block of securities can be made at a price different from the market price. There are two categories of block trades, as described below:
I. Normal Block Trades
The first category of block trade transactions may be carried out at a price different from market price under the following conditions:
(i) the securities traded must be included on a list published by the "Societe des Bourses Francaises" ("SBF"); 61 companies are currently so listed on a permanent basis; the SBF also publishing on a weekly basis a list of companies which are also eligible on a temporary basis (i.e., one month) following either a significant increase of the trading volume or a listing through a placement; and
(ii) the block of securities must be of a minimum size (the "Normal Block Size"). The Normal Block Size for each eligible security is revised and published by the SBF at the beginning of each quarter, and has a value of at least FF 0,5 million and a volume of at least 2,5% of the daily transaction for the previous calendar quarter (see Exhibit 1); and
(iii) the price must be within the range of the average weighted buy and sell prices on the market at the time of the trade or, if the trade occurs when the market is closed, at the close of the market. This range of average price is calculated by SBF computers and published on an ongoing basis; if no publication is available, the range is 5% ; and
(iv) the trade must be made by a societe de bourse acting as a counterparty.
The societe de bourse must immediately notify the SBF of the trade, and the SBF will in turn make the transaction public within 2 hours (if the size of the block traded is less than 5 times the Normal Block Size) or the next business day at the opening (if the size of block traded is more than 5 times the Normal Block Size).
II. Structuring Block Trades
A second category of block of securities ("blocs structurants") can be sold at a price different from market price under the following conditions:
(i) the securities traded are listed on the stock exchange ("cote officielle" or "second marche"); and
(ii) the block of securities must represent at least 5% of the issuer's capital or more than FF 100 million; and
(iii) the price must be within a range of 10% of the best spread published on the market. However, the block may be traded at a different price with the prior approval of the CBV ; and
(iv) the transaction is filed with the SBF by a societe de bourse, which must indicate the identity of the seller and the buyer(s).
This type of block trade is made public by the SBF at the opening of business on the day following the trade. In the event that the societe de bourse has acted as counterparty and has not resold all the securities of the block, such publication may be differed for two days.
The contents of this article are intended as a general guide. Specialist advice should be sought for your specific circumstances.
For further information contact Herve Letreguilly on +33 1 44 71 17 17, or enter a text search 'Shearman and Sterling' and 'Business Monitor'.
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