The Shanghai Stock Exchange (SSE) plans to list the treasury bonds (T-bonds) on both the fixed income platform and the auction system (including the block trading system) from November 5, 2010 onwards, with an aim to improve market liquidity of the treasury bonds. Previously, the treasury bonds were traded on either of the above two systems.
According to the "Notice of Listing T-bonds on Both Fixed Income Platform and Auction System" issued by the SSE today, the treasury bonds will be listed on the fixed income platform and the auction system as well. Dealers of the platform can independently choose either the platform or the auction system to conduct spot trading of the treasury bonds while other market participants can trade the treasury bonds through the auction system. The ways for order and spot trading of treasury bonds on the platform or the auction system remain unchanged.
The notice stipulates that pledge-style repos will be traded on the auction system, with the ways for trading and order of in-and-out storage of the pledged bonds unchanged. The fixed income platform will still accept orders of in-and-out storage of pledged bonds. The notice also requires platform dealers to set up complete business management system and risk control mechanism to strictly forbid short selling in spot trading. The SSE is entitled to pronounce the transaction invalid if short selling occurs on the fixed income platform or impose restriction or suspension on bonds transaction in serious cases.