* Call auction to replace negotiated share transfer in trading hours
* Improve mechanism may help boost liquidity
* New Third Board index hits record low, down 60 pct from peak (Adds more details, background)
SHANGHAI, Dec 22 (Reuters) - China’s main over-the-counter (OTC) equity market said on Friday that it would improve its trading mechanism by introducing auction trading, in an apparent effort to boost liquidity.
The National Equities Exchange and Quotations (NEEQ) also published new rules on discriminative treatment of companies traded on the New Third Board and on information disclosure.
China launched the OTC equity board in 2015, hoping it would become a hotbed of innovation. But after initial excitement, the market slumped, before entering a prolonged decline, strangled by thin liquidity.
An index tracking the board on Friday fell to a record low of 987.8741 points, down more than 60 percent from its 2015 peak.
Starting on Jan. 15, negotiation-based share transfers during the trading session would be scrapped and replaced by call auction trading, general manager Li Ming, told a news conference in Beijing.
Qualified companies can also choose equity trading via market makers, while negotiation-based share transfers would only be allowed outside the trading session.
Call auction trading, a mechanism adopted by stock exchanges, is expected to make the OTC board more liquid. (Reporting by Samuel Shen and Adam Jourdan; Editing by Jacqueline Wong)