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On September 27, SZSE officially released the Implementation Rules for Trading, Creation and Redemption of Securities Investment Funds on Shenzhen Stock Exchange (Revised in 2019), which will take effect on October 21. The revision of the Rules improves the settlement mode of SZSE ETF trading, adjusts the creation and redemption mode of cross-market ETFs on SZSE. The move better meets the actual market demand, increases the efficiency of market creation and redemption, and contributes to the long-term sound development of the SZSE’s ETF market.
The revision of the Rules mainly includes two aspects: First, the trading settlement mode of SZSE ETF was transformed from T+1DVP to the A-share mode. After the adjustment, the settlement time of ETF shares was advanced, from “T+1” day to “T” day, while the fund settlement time remained “T+1” day, which is consistent with the A-share settlement time. Second, the creation and redemption mode of the cross-market ETFs on SZSE was altered. With the OTC share purchase and redemption mode retained, the creation and redemption mode of cross-market ETFs traded on SZSE was changed from “full-cash substitution” to “in-kind creation and redemption of SZSE shares and cash substitution of SSE shares” mode, and the CSDC was responsible for the guaranteed settlement.
The relevant person in charge from SZSE said that the adjustment of the settlement mode of ETF trading on SZSE has the following advantages. First, the ETF operation mode has been streamlined and the operating costs and operational risks of all market participants been lowered, helping to ensure the safe and stable operation of the ETF market. Second, the ETF market liquidity has been enhanced and the role of ETF products as a tool been strengthened, helping to guide the wide participation of medium- and long-term funds represented by institutional investors on the A-share market through the allocation of ETF. It is notable that after adjusting the exchange-traded creation and redemption mode of the cross-market ETFs, the ETF share created can be sold on the same day of purchase, and the stocks gained from the shares redeemed can be sold on the same day of redemption. Investors and liquidity service providers also see significant improvement in ETF shares and capital use efficiency.
In recent years, SZSE ETF products have received wider recognition from the market and achieved sustainable growth in both quantity and scale. There are by far 63 ETFs on SZSE with the exchange-traded net asset value reaching RMB106.1 billion, up 17% and 45% respectively from the end of last year. SZSE has always paid high attention to the innovation and development of the ETF market. In addition to the ETF trading settlement mode optimization, efforts have been paid in the following aspects. First, reducing the market costs. The initial listing fee, monthly fee and charge of data flow of liquidity service providers in the marketing units will be temporarily exempted, according to a notice issued on September 12. Second, continuously enriching the ETF product system to back the development of ETF products in the Guangdong-Hong Kong-Macau Greater Bay Area and the reform of local state-owned enterprises, rolling out the first batch of commodity futures ETFs, and actively driving the development of innovative ETFs such as interbank market bond ETF and crude oil ETF. Third, perfecting investor education and services by carrying out such activities as ETF lectures and institutional investor symposiums on an ongoing basis. Up to now, SZSE has held a total of 57 ETF lectures which covered 14,000 participants.
SZSE will implement the requirements of the Opinions of the CPC Central Committee and the State Council on Supporting the Building of Shenzhen into a Pilot Demonstration Area of Socialism with Chinese Characteristics based on full understanding. We will earnestly fulfill the deployment requirements proposed by the CSRC on the symposium on deepening capital market reform by further deepening market reform, actively improving basic institutions and rules, continuing to enrich product supply, and continuously raising the market service level in a bid to make greater contribution to the high-quality development of China’s economy.
