On March 13, according to the unified deployment of the China Securities Regulatory Commission (CSRC), SZSE released the Notice on Revising Relevant Articles on Bond Amortization in the Implementation Rules of SZSE on Bond Trading and the Notice on Amortization of Private Placement Corporate Bonds During Listing, which adjust the write-down method for bond amortization from reduction of positions to reduction of the face value and specify the corresponding face value of bonds, the calculation method for the ex-right reference price and information disclosure requirements and so on when the business is triggered.
After those rules become effective, if the face value write-down method is still adopted for bond amortization, when the bond issuer amortizes the principal, the number of bonds in investor accounts shall remain unchanged, while the face value carried by a bond shall be written down accordingly. In the meantime, the accrued interest of the bond shall be calculated based on the face value of the bond after such adjustment.
To ensure smooth operation of the bond amortization business of SZSE after such an adjustment, SZSE, in cooperation with China Securities Depository and Clearing Co., Ltd. (CSDC), combed its current business comprehensively, defined the risks of business adjustment, made arrangements for corresponding technical operations and organized market participants to jointly advance the business in an orderly manner, to ensure safe, stable connection between the old and new business. First, improving the system of rules to adapt to business changes in an orderly manner. Because the application scope of the business adjustment includes publicly and privately issued bond products (listed companies’ convertible bonds currently excluded) listed on SZSE, SZSE added the chapter on bond amortization in the previous version of the Implementation Rules of SZSE on Bond Trading, and drafted and released the Notice on Amortization Business of Private Placement Corporate Bonds During Listing, which clearly lays down the arrangements for amortization business of publicly and privately issued bonds. Second, implementing “separation between old and new rules” to ensure smooth business transition. The effective date of the business rules is March 23, 2020. If the amortization business has been triggered for an amortized bond prior to that day, the position write-down method will still apply. If the amortization business for an amortized bond is to be triggered for the first time after that day, the face value write-down method shall apply. Such arrangement allows time for market participants to make proper preparations for the transition and technical arrangements, thus ensuring business continuity. Third, doing well in system support and risk warning to ensure smooth business operation. SZSE has completed supporting transformation of the technical system for the business adjustment. Later, SZSE will guide relevant market entities to conduct amortization business correctly, urge issuers to do well in risk warning to investors through information disclosure, making clear specific arrangements when amortization business is triggered.
The revision of the rules is conducive to unifying valuation of cross-market bond varieties in the secondary market, improve the efficiency of custody transfer business, and facilitate interconnection, coordination and unification of the bond market. Next, SZSE will follow the arrangements and requirements of CSRC, do a good job in rules connection and policy adaption for the implementation of the new Securities Law, continue to improve the basic rules and policies of the bond market, increase market efficiency and service level, and further advance the high-quality development of the bond market.
