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With the growth of the Chinese capital market and the successive launching of innovative business lines and products, the market is increasingly calling for a flexible and diversified trading system. The Shanghai Stock Exchange (SSE), in response to the market need, carries out systematical innovation and platform renovation for the block trading market, in a bid to build it into a wholesale market advancing in line with the bidding-based matching market. Besides, the SSE continues to diversify and perfect trading products and systems of the bond market. In order to standardize innovative business lines, the SSE has made some amendments to the “SSE Trading Rules”. That is, it has made some complements and adjustments for issues including the systematical innovation of block trading, the relevant arrangement for repayment of bonds on installments, the upper limit of single declared order of bonds, and intraday trading of bond ETF products and others, with the details as follows:
1. The thresholds for block trading are lowered properly. With an aim to attract more investors to participate in block trading, the thresholds for the block trading of A shares, B shares, and funds are lowered to about 60% of former standards, and those for the block trading of treasury bonds and repo of bonds will be decreased to the same standards as those for other kinds of bonds. Specifically, the lower limit for block trading of A shares is adjusted from 0.5 million shares or RMB3 million to 0.3 million shares or RMB2 million; that for block trading of B shares is adjusted from 0.5 million shares or USD0.3 million to 0.3 million shares or USD0.2 million; that for block trading of funds is adjusted from 3 million fund units or RMB3 million to 2 million fund units or RMB2 million; that for block trading of treasury bonds and bonds repo is adjusted from 10,000 lots or RMB10 million to 1,000 lots or RMB1 million.
2. The type of fixed-price declaration for block trading is added. The current block trading, characterized by price negotiation, might trigger an array of surmises and even queries towards knock-down prices in the market. The type of fixed-price declaration to be added will provide more transparent price choices. Buyers and sellers could trade at closing prices in the market or weighted average prices based on intra-day trading volume, which will meet the needs of investors, especially institutional investors, for further enhancing transparency and fairness of block trading.
3. The time interval for handling declarations for successful block trading is prolonged. With an aim to meet the requirement of investors and gradually improve the market-oriented service of the SSE, time interval between 16:00 to 17:00 will be added on the base of the existing time intervals for block trading. During the new time interval, declarations of successful block trading can be handled, and the relevant transactions will enter the liquidation and settlement procedures on the next trading day.
4. The business rules of repayment of bonds on installments is perfected. In order to adapt to the development of the bond market, exceptional arrangements are made for face value of bonds, price unit and others. Besides, special sections are added to the “SSE Trading Rules” to regulate the business of repayment of bonds on installments and specify some issues such as the way of repayment on installments, price unit, trading unit, and ex-right treatment.
5. The maximum for single declared order of bonds in the auction system is elevated. In light of the increasing bond transactions, the current trading declarations cannot meet the requirement of market participants, especially institutional investors, so we should properly increase it. The maximum single declaration for trading of bonds and collateralized repo trading of bonds in the auction system is increased to 0.1 million lots, namely, RMB0.1 billion face value, from 10,000 lots, so as to meet the requirement of investors participating in spot trading and repo trading of bonds and increase the trading efficiency of the SSE’s bond market.
6. It is specified that the intra-day trading will be implemented for bond ETF products, exchange traded currency fund products, and gold ETF products. The intra-day trading is carried out for bond trading, and bond ETF products and exchange traded currency fund products mainly take bonds as the investment target, with the same trading attribute as that of bond trading. In addition, the intra-day trading is implemented for the futures and spot trading of gold, and the same trading arrangement needs to be made for gold ETF products. Therefore, the intra-day trading will be carried out for bond ETF products, exchange traded currency fund products, and gold ETF products. The fund units bought by investors can be sold on the very day.
Noticeably, some amendments, such as the newly-added type of declaration for block trading and the newly-added trading time interval after closing, cannot be implemented temporarily due to some issues including market business lines and technical preparations. It is predicted that they will be implemented after relevant technical development and testing are completed in April 2014.
