The Shanghai bourse issued a circular to cap the share sell-off rate for large shareholders on Saturday, in an effort to subdue the market's free fall.

The Shanghai Stock Exchange (SSE) forbids major share holders with stakes at 5 percent or above from selling more than 1 percent of a listed company's share capital through the stock exchange's centralist bidding system every three months.

The restriction was announced as stocks plummeted 7 percent half an hour into trade on Thursday, triggering a newly introduced circuit breaker. The mechanism in effect on Jan. 1 was triggered twice in the week.

The China Securities Regulatory Commission (CSRC) has tightened control on short-term big share sales since last year by imposing fines on profiteering trading.

It ordered major shareholders must file their plans 15 trading days in advance of sales on Saturday.