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Formulated and issued by the Shanghai Stock Exchange (SSE), the Rules of the Shanghai Stock Exchange for Bond Trading and 3 sets of applicable supporting guidelines (hereinafter collectively referred to as the “Bond Trading Rules and Guidelines”), which will come into effect officially on April 25, aim to further deepen the reform of the bond trading system, enhance the liquidity of the secondary market, regulate the bond trading operations, and promote the sustainable and healthy development of the exchange-traded bond market. Based on the development principles of the bond market, the release of the Bond Trading Rules and Guidelines serves as an important measure to further implement the overall requirements for the high-quality development of the SSE’s bond market. The new Bond Trading Rules and Guidelines will bring their functions into play through the platforms such as the previously launched new bond trading system. So far, the SSE has formally established a relatively independent and sound system of bond trading and trading rules.
Since the reform of the issuance system for corporate bonds in 2015, the SSE has seen a yearly increase in the volume of bonds for custody, with the amount at RMB15.2 trillion by the end of 2021, marking a much higher capacity for serving the real economy. At the same time, the relative weaknesses in the development of the secondary bond market have also been increasingly highlighted. Since 2019, under the guidance of the China Securities Regulatory Commission (CSRC), the SSE has continued to address inadequacies in a bid to build an independent set of bond trading rules to improve the fundamental system of the secondary bond market.
As the SSE’s basic business rules for bond trading, the newly released Bond Trading Rules provide comprehensive, overall and basic provisions for each part of bond trading. The three sets of applicable supporting guidelines detail the requirements in management of bond trading participants, general collateral repos, market making for bonds and other aspects. The Bond Trading Rules and Guidelines include the main content as follows. First, they have been designed to establish and improve the system for bond trading participants, and continuously expand the types of participating institutions in the bond market. Second, they have been designed to optimize the bond trading mechanism, including improving the existing trading modes, introducing the bidding-based transaction mechanism, extending the trading hours, and readjusting the bond trading orders and the price limit methods. All this aims to gear the bond trading mechanism to the basic characteristics of bond trading and bond investors’ trading habits. Third, they have been designed to set up the market maker mechanism for bonds, strengthen the price discovery function of the SSE’s bond market, and increase the liquidity of the bond products. Fourth, they have been designed for reinforced supervision and risk management for bond trading, and improved self-regulation of the participants and trading conduct, as well as the mechanism of response to irregular transactions. Meanwhile, upon absorption and integration of the prior relevant rules, business notices and guidelines, the SSE has abolished 14 sets of relevant rules and guidelines, in an effort to create a “concise and investor-friendly” system of bond trading rules.
Going forward, the SSE will ensure an orderly transition of the trading mechanisms by effectively advancing the tasks for the implementation of the Bond Trading Rules and Guidelines, and providing investors with guidance and services. Furthermore, under the guidance of the CSRC, the SSE will also conduct more market surveys for an in-depth understanding of the market’s bottleneck problems, and continuously optimize the construction of infrastructure and basic systems for the bond market. All this aims to better meet the needs of investors, fuel the market development, and boost the construction of a high-quality bond market.
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