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To implement the requirements of the Measures for the Administration of Convertible Corporate Bonds, further guard against the trading risks of convertible corporate bonds (hereinafter referred to as convertible bonds), and maintain the order of trading, under the overall guidance of the China Securities Regulatory Commission (CSRC), the SSE drafted the SSE Detailed Rules for the Implementation of Trading of Convertible Corporate Bonds (Draft for Comment) (hereinafter referred to as the Detailed Trading Rules), on which it has started to solicit public opinions from the market on June 17. At the same time, in order to further enhance the investor suitability management for convertible bonds, the SSE has simultaneously published the Notice of Matters Related to the Suitability Management for Convertible Corporate Bonds (hereinafter referred to as the Suitability Notice), which will come into effect on June 18.
In recent years, convertible bonds have gradually grown into an important financing tool for listed companies, especially for small and medium-sized listed companies from the private sector. They have played an active role in serving the real economy, increasing the proportion of direct financing, and improving the financing structure. However, problems have as also been exposed, including the misalignment of rules with the product attributes, the significant intraday fluctuations and the inadaptable management of investor suitability, which are open for improvement. The drafting of the Detailed Trading Rules and the Suitability Notice adheres to the principle of market orientation, takes into account the efficiency of the convertible bond market, market stability and investor protection, and aims to effectively prevent excessive speculation and maintain the stable operation of the convertible bond market. Meanwhile, with no adjustment to the financing policies in the primary market involved, relevant measures will not affect the normal performance of the financing function of the convertible bond market, nor will they weaken the service and support for the real economy, particularly for small and medium-sized listed companies from the private sector.
The main points of the Detailed Trading Rules and the Suitability Notice are as follows. The first is to clarify the price limits. On the first day of listing, convertible bonds will have up and down price limits of 57.3% and -43.3%, with a 20% limit up and down starting from the next day. The second is to define the criteria for abnormal fluctuations. Combined with the adjustment of the price limits, the criteria for abnormal fluctuations and severe abnormal fluctuations in prices of convertible bonds have been introduced, clarifying the verification and information disclosure obligations for the listed companies in the case of abnormal fluctuations and serious abnormal fluctuations. The third is to specify the investor suitability requirements in issuing convertible bonds through non-private placement. While introducing the access threshold of “2 years of trading experience plus RMB 100,000 in assets”, separation is made between new and existing investors to strengthen investor protection and ensure that the existing investors can continue their participation without being affected. The fourth is to add a special mark. The “Z” mark is added before the ticker of a convertible bond on its last trading day to fully warn investors about risks and effectively protect the legitimate rights and interests of investors. The fifth is to adjust the relevant terminology according to the bond trading rules, including changing “auction trading” into “trading through matching”.
The last day to submit comments on the Detailed Trading Rules is July 1, 2022. The SSE welcomes your valuable opinions, and will officially release the Detailed Trading Rules upon completion of all preparations such as collection, evaluation, absorption and adoption of relevant feedback and suggestions. Going forward, the SSE will continue to implement the guidelines of “building the system, non-intervention, and zero tolerance”, and adhere to the reform in accordance with market principles and rule of law. In accordance with the unified deployment of the CSRC, the SSE will strive to consolidate the system foundation, maintain the trading order, continue to promote the high-quality development of the convertible bond market, and give better play to the function of the convertible bond market in serving the real economy.
Attachments:
Notice of Matters Related to the Suitability Management for Convertible Corporate Bonds
