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Recently, the Shanghai Stock Exchange (SSE) issued the announcement on abolishing the 15th batch of business rules and guidelines, and released a new guide map of business rules system, marking the progress in building the "concise and user-friendly" system of rules.
The revised Securities Law clarifies the general applicability of business rules and requires stock exchanges to operate and manage the market in accordance with business rules. In order to implement the fundamental requirement for "building a sound system" in the new situation, the SSE has strengthened its efforts in overhauling, evaluating, formulating, amending and repealing the existing business rules. In 2020, 43 rules were newly enacted, 21 were revised, 77 were abolished, and 134 sets of business guidelines were repealed. The total number of business rules and guidelines were reduced by 25%, making the system of business rules more mature and completed.
Committed to transparent regulation
The criteria are more transparent. Sorting out self-regulation matters and clarifying the regulatory criteria are the focus of the SSE's current efforts in reviewing and improving the rule system. Taking the opportunity of improving the supporting rules for the new Securities Law, the SSE has effectively implemented the requirements for "streamlining procedures, delegating power and improving services", comprehensively sorted out the self-regulation responsibilities of the exchange, and formulated and disclosed the regulatory criteria and implementation procedures, so as to eliminate possible problems such as "pocket policies" (i.e. policies not published or clearly defined as if hidden in the pocket) and "hidden thresholds", and stabilize the expectations of the market participants. Specifically, the SSE has made special efforts in improving the review criteria for issuance and listing on the Sci-Tech Innovation Board (STAR Market), formulated relevant guidelines for the issuance and listing review of corporate bonds, and clarified review criteria and information disclosure requirements for bonds. The SSE has set up criteria for imposing disciplinary actions on listed companies, implemented the requirements for targeted regulation and categorized measures, strengthened the accountability of the "critical few", and elaborated the identification and differentiation of responsibilities among the responsible entities, which greatly enhanced the transparency of regulation.
The rules are clearer. The SSE has continued to sort out and improve the rules by fully evaluating and refining the institutional arrangements instead of simply adopting or abolishing rules. The SSE has clarified the participants' rights and obligations, regulated the operation and organization of specific businesses, managed the conduct of market entities, and guided all parties concerned in performing their duties. It has focused on improving the quality of listed companies, formulated guidelines for companies' operation, and made concentrated efforts in preventing violations such as financial fraud, capital occupation and illegal guarantees, and major risks such as heavy equity pledges. In particular, the SSE intensified the compliance requirements for controlling shareholders and actual controllers. In addition, it focused on the identification and prevention of abnormal trading operations, introduced the early warning and monitoring indicators, tightened the red line, guided investors in conducting compliance trading, and urged the members to fully fulfill their responsibilities for management of clients' trading conduct.
The implementation is stricter. Business rules are the concrete basis for the SSE to organize and manage the market and implement self-regulation. The current efforts in overhaul and evaluation have enabled the business rules to be applied to all SSE affairs concerning self-regulation and market services, and reduced the costs of communication for the market participants by clarifying criteria and procedures. By unifying the regulatory criteria and setting the time limits for handling the businesses, the SSE has ensured self-discipline in fulfilling the responsibilities of front-line regulation, so as to ensure and regulate the exercise of the self-regulatory powers. For example, in accordance with the disclosed disciplinary rules and implementation standards, the SSE has imposed self-discipline punishments on various violations in a timely manner, thus cleaning up the market environment and maintaining the market order. In addition, adhering to the principle of combining leniency and strictness, the SSE has categorized the violations by the degree of severity and differentiated the responsible entities, implemented reasonable and targeted regulation while rejecting "undifferentiated equality", and fully explained the logic in the disclosed decision letters so as to remain open to public supervision.
Elevating the "sense of fulfillment" through demand-driven improvement
The system is more concise. The SSE has committed to making the system more user-friendly. It has made special efforts to improve the system to be more concise and intelligible. First, a three-tier concise structure has been put in place with the basic rules as the "trunk", guidelines for application of rules as the "branches" and business operation guides as supplements. With the regulation of listed companies as the demonstration and lead area, the SSE has formulated a system of rules with clear structure and concise contents centered on listing rules and supplemented by guidelines for application of self-regulation rules and business operation guidelines for listed companies. Second, by merging similar rules and abolishing inapplicable rules in a timely manner, the number of rules has been significantly reduced. In 2020, the SSE made three announcements on collective abolishment of rules. A total of 211 sets of rules and guidelines were repealed, greatly sliming the rules. Up to now, the SSE has released 11 sets of guidelines for application of business rules and 15 sets of business guidance. All theses rules have been continuously numbered respectively according to the business lines they fall in.
The procedures are simplified. In the current round of review, the SSE has extensively listened to the opinions of the market participants on whether the business procedures were simple and convenient through questionnaire surveys, research, visits and other means, and has made relevant improvements. First, in accordance with the principle of market orientation provided in the new Securities Law, the SSE has implemented the requirements for "streamlining procedures, delegating power, and improving services", and expanded the scope of application of market entities' self-credit commitments. By replacing "review" with "commitment", the SSE has actively guided the market entities in making full use of the value of the self-credit commitments, and streamlined and improved the business materials. 11 sets of certification materials for handling of stocks, options and other products were cancelled. Second, the SSE has continued to optimize the handling procedures of the market services. For example, in the services for transfer of listed companies' shares and other matters, the SSE has adopted the "one-stop processing" mode merging multiple business windows, and the "checklist-based verification" mechanism characterized by the combined forms for handling materials. Such measures have significantly reduced the processing costs for the market entities, further enhanced the expectations for business handling, and improved the market players' sense of fulfillment.
The use has been made easier. It is ultimately up to the market participants to decide whether the business rule system is concise and user-friendly. In order to continuously improve the user experience, the SSE has optimized the overall structure of the business rule system, and formed a new system of business rules with the four markets of stocks, bonds, funds and derivatives as the core, the cross-border connectivity mechanisms and innovative trading businesses as the featured sector, and the rules, member management, disciplinary actions and fees as the general sector. In order to facilitate "map-based searching" and "on-demand services", the SSE has formulated the guide map of SSE business rules, so as to offer a panoramic image of the system of rules. Specific rules will be displayed on designated columns of the official website and APP of the SSE to provide intelligent services such as news feed and download for the investors to learn and use the SSE business rules in a timely manner. In addition, the SSE will break the division of business lines to collectively display the rules most frequently used by the investors. For example, a separate series of guidance will be established. It will include necessary provisions concerning risk disclosure statements for the businesses of stocks, bonds, funds and derivatives. These guidances will be uniformly numbered and displayed to facilitate investors’understanding and use on demand.
Intensive improvements are based on extensive accumulations. After 30 years of persistent efforts, the "handbook" of the SSE's self-regulation rules is becoming thinner and more elaborate, with more focus on quality than quantity. Going forward, under the guidance of the China Securities Regulatory Commission, the SSE will continue to listen to the opinions and suggestions of market entities in various aspects, promote the development of the self-regulation system, optimize the self-regulation criteria and mechanisms, and effectively fulfill the responsibilities for front-line regulation.
