China scrapped compulsory net purchase orders on securities traders to allow them trade freely on market conditions, the country's top securities watchdog said Friday.

China Securities Regulatory Commission (CSRC) ordered securities traders to buy more stocks than they sold in July when stock markets experienced violent fluctuations.

The move is considered a reflection of CSRC's confidence in the stock markets, which resumed IPOs earlier this month.

The regulator decided to enhance crackdown on illegal marginal financing activities via private equity and assets management products and suspended the highly leveraged behavior of dividend swap business.

The benchmark Shanghai Composite Index fell 5.48 percent to close at 3,436.3 points, the largest decline since August 24 as news broke of investigations into major brokerage houses triggered panic.

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