On February 5, SZSE officially released the Notice on the Matters Related to the Program Trading Reporting of Convertible Bonds (hereinafter referred to as “the Notice”). This is an important measure SZSE adopted to implement the requirements set out in the new Securities Law, regulate the program trading management of convertible bonds, and promote the convertible bond market towards healthy development.
In 2020, some convertible bonds experienced great price volatility, which drew widespread attention from market entities and media outlets. The program trading was used by a part of investors, and the trading volume reached a certain scale. On December 31, 2020, the China Securities Regulatory Commission (CSRC) released the Convertible Bond Management Measures (hereinafter referred to as the “Measures”). To implement the requirements outlined by the Measures, strengthen the program trading management of convertible bonds, maintain the transaction order of the market, and protect the legitimate rights and interests of investors, SZSE made earnest study, solicited opinions from some members, formulated and distributed the Notice. With the establishment of an information reporting system as its core, the Notice is aimed to enhance the compliance awareness of market entities and promote the program trading of convertible bonds towards standard development.
Requirements for the program trading management of convertible bonds are made clear in the Notice. Firstly, the Notice defines the scope of program trading investors, which include member customers, members, securities investment fund management companies and insurance institutions that directly use trading units for transactions, and other types of investors. Secondly, the Notice indicates the reporting methods. Member customers shall report to the members who accept their transaction entrustment, while members and other institutions directly report to SZSE. Thirdly, the Notice sets out the content to be reported, including investor identity, securities account, sources of funds, trading strategy, trading software, and other information. Fourthly, the Notice provides that investors shall guarantee the authenticity, accuracy and integrity of the reported information. According to the needs of self-regulation, SZSE can supervise and inspect the program trading reporting of convertible bonds by both onsite and offsite means.
The reporting mechanism for program trading of convertible bonds is a move conducive to improving market transparency and regulatory accuracy. The practice of introducing the program trading reporting mechanism to convertible bonds before any other is expected to accumulate useful experience for the market-wide implementation of relevant practices in the future. Next, SZSE, according to the arrangements and requirements of the CSRC, will urge and supervise various market entities to strictly implement the requirements set out in the Notice. To press ahead with the relevant work in an active yet prudent way, SZSE will strengthen the regulation of program trading of convertible bonds, maintain the transaction order of the convertible bond market, and propel the market towards robust development.