China's regulation on the Issuance and Underwriting of Securities, which took effect Tuesday, make it possible for the issuer of selected initial public offerings (IPO) to adjust the ratio of shares for institutional and public investors.

Under the rules published Saturday by the China Securities Regulatory Commission (CSRC), an IPO issuer and the major underwriter can create a "greenshoe" mechanism, which allows them to re-allocate shares reserved for institutional investors to minority investors.

According to Article 32 of the regulation, the mechanism can be used if the number of shares offered in the IPO reaches a "certain" size, and demand for the shares far exceeds the offering.

A CSRC said the move would give public investors more opportunities to buy new shares.

Analysts said the mechanism will probably be used in the upcoming IPO of the Industrial and Commercial Bank of China (ICBC), the country's biggest commercial bank.

The commission will announce later this week its decision on ICBC's request for an IPO on the Shanghai Stock Exchange.

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