With the approval of China Securities Regulatory Commission (CSRC), Shenzhen Stock Exchange (SZSE) has started preparing for the merger of the Main Board and the small and medium-enterprise (SME) board, and issued the Notice on Preparations for the Merger of Main Board and Small and Medium-sized Board" (hereinafter referred to as the Notice). SZSE spokesperson answered reporters' questions of market concerns.
1. Could you introduce the background and significance of this merger?
Answer: Over years of reform and exploration, SZSE has gradually formed a multi-tiered capital market system including the Main Board, the SME Board, and the ChiNext board under the leadership of CSRC. In early 2000, we halted the issuance of new shares in the Main Board. In May 2004, we established the SME Board under the Main Board in order to involve more direct financing channels for SMEs and promote the staged development of ChiNext board. Over the decades, we have worked vigorously in exploring the operation regulation, information disclosure, investor protection, and delisting mechanism for companies of the SME Board, laying a solid foundation for launching the ChiNext board. Thanks to the lessons learned along the way, SZSE has built new accesses for SMEs to enter the capital market, and played an important role in optimizing China’s economic structure, transforming growth momentum, and building a modern economic system.
As an integral part of the Main Board, the SME Board also operates within the general framework of the Main Board. Ever since its establishment 16 years ago, the SME Board has witnessed the flourishment of its listed companies, and come close to the Main Board in terms of market value, performance, and transaction characteristics. Merger of the two boards is therefore a natural result of the market development trends, and an inherent requirement for building a lean and clear market system.
On the Fifth Plenary Session of the 19th CPC Central Committee, the authority clarified the strategic goals and major tasks for the healthy development of China’s capital market during the "14th Five-Year Plan" period. In the light of the session, this merger is a far-reaching action to deepen the supply-side structural reform of China’s financial system, and comprehensively strengthen the reform its capital market as a pivotal role, in order to better serve the real economy. The merger will let SZSE having the Main Board and the ChiNext board in a dual-sector structure which is simpler and more distinctive. While showing clearer market positioning, the new structure also has three benefits: 1) it clarifies the functional positioning of the two boards, consolidate the market foundation, improve market quality and efficiency, and improve the vitality and resilience of the capital market; 2) it further highlights the market positioning of the ChiNext board and thoroughly implements the innovation-driven development strategy; and 3) it gives full play to the functions of SZSE, improves the market-based allocation of capital factors, and better serves the development of the Guangdong-Hong Kong-Macau Greater Bay Area and the pilot demonstration area of socialism with Chinese characteristics, and better serves the overall national strategic development.
2. What are the overall arrangements of this merger?
Answer: Since the establishment of the SME Board, its mechanism arrangements, e.g. issuance and listing, information disclosure, trading mechanism and investor suitability requirements, are basically consistent with those of the Main Board. The general thinking of merging the Main Board and the SME Board is “Two Unification and Four Unchanged”, that is, unified business rules and unified mode of operation supervision, unchanged issuance and listing conditions, unchanged investor’s threshold, unchanged trading mechanism and unchanged code and abbreviation of securities. This merger will conduct an adaptive adjustment to only part of business rules, market products, technology systems, issuance and listing arrangements, generally having a small impact on market running and investor’s trading.
To promote the smooth and stable implementation of reform, SZSE will give an overall consideration of relevant business lines, coordinate and cooperate with all parties in the market and ensure collaborative promotion of business, safe and orderly operation and stable market running based on the working principles of “open-minded attitude, transparency, integrity and impartiality”
3. How about the adjustments related to the business rules and supervision mechanism of listed companies?
Answer: Since its establishment, the laws, regulations and departmental rules followed by the SME Board are generally consistent with those of the Main Board. This merger does not involve substantive revision of relevant laws, regulations and departmental rules. At the beginning of 2019, SZSE started the adaptive evaluation and optimization of the self-regulatory rules system of listed companies in an all-round way, and successively revised and issued a number of industry and special business information disclosure guidelines. In February 2020, the Guidelines for Standardized Operation of Listed Companies were integrated and optimized for the Main Board and the SME Board. In June 2020, an integrated and revised guide for business handling of listed companies was issued. After a new round of delisting system reform at the end of 2020, the differences between the Main Board and SME Board in the stock listing rules have been eliminated. SZSE has basically unified the business rules of the Main Board and the SME Board, and initially constructed a concise and efficient self-regulatory rules system of listed companies with listing rules as the core, standardized operation guidelines, industry and special business information disclosure guidelines as the main task, supplemented by handling guidelines. This merger merely makes adaptive adjustments to a few differentiation provisions of the Main Board and SME Board, such as the unification of the definition of high delivery and transfer in the guidance of high delivery and transfer business, which has little impact on listed companies. Subsequently, SZSE will further improve the integration of rules and the convergence of supervision.
With regards to supervision mechanism, by virtue of taking industry supervision as the basis and taking reasonable balance as the principle, we will divide listed companies into two categories according to their industries, which are supervised by two company management departments respectively.
4. What arrangements does SZSE have for the main impact of this merger on market products?
Answer: This merger has basically no impact on fixed income, futures option products and Shenzhen-Hong Kong Stock Connect, and relevant indexes involving SME Board need to be adjusted adaptively. Based on the Business Notice and related index adjustment announcements, this merger only needs to make appropriate revisions to the full name, abbreviation and sample selection space description of the relevant index, that is, delete the word "board" in the full name and abbreviation of the index, and make some adaptive adjustments. The "SME Board" involved in the sample selection space description of the relevant index is changed to "original SME Board". The above-mentioned index adjustment arrangement will not make substantial changes to the index compilation method, and will not lead to the adjustment of the underlying investment of fund products tracking the relevant index, which is conducive to maintaining the stability and continuity of the index and ensuring the successful operation of fund products.
Next, SZSE will study and optimize the index compilation method with relevant parties in combination with market demand and actual situation, so as to further build a series of SME indexes with more market influence and competitiveness.
5. Please introduce the specific content of technical transformation involved in this merger.
Answer: This merger mainly involves the technical transformation of internal technical systems of SZSE and related systems of market entities such as securities companies and market information providers. The internal technical transformation of SZSE has currently been basically completed. Market participants only need to carry out adaptive transformation on market display and data interface, which takes about 2 months to complete. Overall, the core trading system is basically unaffected, the overall technical transformation project and investment are not large, and the merger has little impact on the technical system of the whole market.
SZSE will coordinate with all parties in the market, organize and carry out market-wide tests in a timely manner based on the technical preparations of all parties, optimize technical support services, improve technical support capabilities, and work with all parties in the market to push forward all the work in a down-to-earth manner to ensure that the market-wide technical preparations are completed with high standards, high quality and high efficiency.
6. What adjustments will this merger make to the issue and listing of enterprises, and will it have an impact on investors' transactions?
Answer: Based on relevant regulations, during the transitional period from the issuance of the Business Notice to the completion of the merger implementation, the current arrangement will be maintained for the issuance and listing of enterprises. After the merger, the issuance and listing conditions of the Main Board are the same as those of the original SME Board, and remain unchanged. The securities category of the original SME Board is changed to "A shares of the Main Board", and the corresponding securities code interval is incorporated into the Main Board for use. The issuance and review arrangements remain unchanged, and the enterprises under review do not need to re-declare the materials, which will not have a substantial impact on the issuance and listing of enterprises.
This merger only changes the securities category of the original SME Board companies, and the securities codes and securities abbreviations remain unchanged, which will not affect the trading methods and trading habits of investors. The trading mechanism of Main Board and SME Board is consistent with the threshold of investors, and there is no difference in investor groups as a whole. The merger does not involve the change of trading mechanism and threshold of investors, and will not have a substantial impact on investors' trading behavior.
To fully protect investors' right to know, SZSE will answer questions of investors' concern through Weibo and WeChat, hotline (400-808-9999) and email (cis@szse.cn) to ensure that investors fully understand the merger of the two boards.
7. Please introduce the preparations made by SZSE to ensure the smooth landing of the merger.
Answer: Currently, the adjustment of business rules related to this merger has been ready, the internal technical system transformation has been basically completed, the regulatory mode, index and product adjustment, issuance and listing have been clearly arranged, and the evaluation and communication work of external technical system transformation has started preliminarily. To make a good connection between the old and the new, and fully reserve time, this merger has set up a transitional period, namely the transition period from the issuance of the Business Notice to the completion date of the merger, during which the Main Board and SME Board companies continue to implement the existing regulations. In accordance with the deployment requirements of CSRC, SZSE will make every effort to promote the orderly and smooth implementation of the merger of the two boards.
