- Conditions for stock issuance and listing should be adjusted in the registration system reform, and the exchange will be responsible for examination and approval, which is the mainstream scheme
- Operations of Shanghai-Hong Kong Stock Connect and the SSE 50 ETF option will be perfected, with their underlyings to be expanded
- Diversified listing indicators will be set in the board of emerging industries, and listing of A shares of internet enterprises will be supported
- An independent bond market management system will be established for promotion of a multi-layer bond market.
The Shanghai Stock Exchange (SSE) has embraced new opportunities for its transformation into a modern exchange by launching the registration system reform of stock issuance, Shanghai-Hong Kong Stock Connect, stock option and other innovative and reform measures.
On March 7, the China Securities Regulatory Commission (CSRC) held the press conference for deputies to the NPC and members of the CPPCC National Committee in the securities regulatory system. Gui Minjie, Member of the CPPCC National Committee and SSE Chairman of the Governors, introduced at the conference the SSE’s plans in terms of the construction of the blue-chip market, the registration system reform of stock issuance, Shanghai-Hong Kong Stock Connect and the SSE 50 ETF option.
Gui said that the existing conditions for stock issuance and listing should be adjusted in the registration system reform. Currently, the mainstream scheme is that the exchange will be in charge of examination and approval of public offering of securities. Decentralization of examination and approval authority will not lead to vicious competition among exchanges.
Besides, he revealed that on the basis of ensuring stable operation, the operations of Shanghai-Hong Kong Stock Connect and the SSE 50 ETF option would be perfected, with their underlyings to be expanded.
Promotion of registration system reform on a steady track
Gui said that the whole scheme of the registration system was still in the process of demonstration for approval. The registration system reform will mainly involve general framework design, reform scheme formulation, amendment to the “Securities Law”, supporting measures and rules, arrangement for examination and approval personnel, publicity and training of the new system, and transition from the old system to the new one.
As to the question that who will examine and how to examine under the registration system, Gui said that the registration system does not mean no examination. Judging from the current situation, the mainstream scheme is that the exchange will take charge of the examination and approval. There are still some conditions for issuance and listing in the registration system, and the examination and approval work will focus on the effects of information disclosure, which means that enterprises are required to make themselves understood by investors judging their advantages and disadvantages.
Gui held that the roles and responsibilities of intermediaries should be further emphasized for the registration system, and the intermediaries should assume legal responsibilities. More efforts should be made to investigate and crack down on enterprises and individuals who commit violations, practice fraud and conceal information. Meanwhile, the internal layering of the SSE stock market should be propelled by making full use of the registration system reform to adjust conditions for issuance and listing.
For the question concerned by the market that the decentralization of examination and approval authority might lead to vicious competition among exchanges, Gui believed that the decentralization would not result in vicious competition. As market organizers, exchanges will attach more importance to improve its ability in serving the real economy under the supervision of regulatory departments and media.
Will listing of China’s mainland enterprises in Hong Kong market be affected by the registration system reform? Gui clarified that as China boasts rich resources for listing, enterprises in China’s mainland choosing to be listed in Hong Kong market have shown their demands of expanding international business, participating in global competition, and enhancing reputations in the world. Compared with the A-share market, the Hong Kong market has its own advantages, so the registration system reform will not affect China’s mainland enterprises listing in Hong Kong market. There will be no such problem as scrambling for listing resources.
Expanding the underlyings of Shanghai-Hong Kong Stock Connect and the SSE 50 ETF option
The launch of Shanghai-Hong Kong Stock Connect and the SSE 50 ETF option on the SSE since last year has not only expanded the SSE’s market and increased its market thickness, but also added for the first time the product line of exchange-traded option, bringing connections to the spot market and futures market and ending the era of linear profit and loss in the market, which bears great significance.
Gui said that the general operation of Shanghai-Hong Kong Stock Connect and the SSE 50 ETF option had met expectations, and the mechanism of Shanghai-Hong Kong Stock Connect would be further optimized to bring consistent solutions to factors that limit investors to trade through Shanghai-Hong Kong Stock Connect. Besides, the SSE will further promote trading mechanism innovation, research and promote the establishment of margin trading and securities lending as well as line expansion under the Hong Kong Stock Connect.
Gui also responded to the stagnant trading and inactive account opening of the SSE 50 ETF option. He thought that the current pricing of the SSE 50 ETF option contract is reasonable, as the market makers are playing the roles in guiding reasonable quotations and offering market liquidity. The reason for stagnant trading is that the system design for option is to ensure its smooth start and stable operation.
According to introduction, the SSE will further improve the margin mechanism for ETF option, including portfolio strategy and securities used as margin to increase the efficiency of securities and capitals, thus lowering the cost of using options to hedge risks. The SSE will further expand the scope of the underlyings of ETF option, research and launch single stock options, and options with more flexible exercise manners and periods, such as American option, weekly option and long-term option.
In addition, there will be breakthroughs in establishment of the SSE’s International Financial Asset Trading Platform in the Shanghai free trade zone. According to Gui, the positioning of the platform mainly includes: providing financing services for enterprises in the free trade zone; enabling overseas investors to trade stocks, bonds and funds through the free trade accounts and the trading platform; exploring to involve foreign capitals in the primary market, such as introduction of overseas institutional investors to participate in inquiry placing of domestic IPO, and providing trading services for securities and futures dealers that do cross-border investment as agents of their clients; and seeking to have qualified overseas enterprises issue RMB bonds.
Building an independent bond market management system, and setting up diversified listing indicators for the board of emerging industries
During the NPC and CPPCC sessions of last year, Gui submitted the proposal of establishing the board of emerging industries on the SSE. As for the progress concerning the board, Gui said that the SSE would, in light of the registration system reform and the amendment to the “Securities Law”, prepare for launch of the board in due time for the internal layering of the market.
As for the listing standards of the board, Gui said that diversified listing indicators would be adopted for the board, with such financial standards as “market capitalization + business income + profit” or “market capitalization + business income + liquidity”. Diversification of some non-financial standards will also be considered, in a bid to support the listing of A-shares of internet enterprises.
Notably, Gui also introduced the SSE’s plans in construction of the bond market. According to him, in its next step, the SSE will go all out to develop the exchange-traded bond market, broaden the market scale, attract bond issuers, further enhance market efficiency, simplify issuance and listing procedures, strengthen product innovation, study and promote major securitizable underlying assets, and expand the scale of assets securitization. Besides, a complete chain system for the issuance, listing, trading, information disclosure and follow-up management of municipal and corporate bonds will be established for their development. Moreover, the obstacles met by domestic and overseas institutional investors in trading in the exchange-traded bond market will be eliminated.
Gui said the SSE would establish an independent bond market management system according to rules of the bond market. It will improve relevant supporting systems and technological systems, establish the system for the development of the bond market that is comparatively independent of the stock market, promote the building of a multi-layer bond market, and improve the technological system of the bond market.
