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Dear Members, Ladies and Gentlemen,
Good morning,
I am very pleased to attend the assembly of members of Shenzhen Stock Exchange (SZSE). It has been 20 years since the SZSE held the last assembly. So this meeting is a significant event and has far-reaching influence. On behalf of China Securities Regulatory Commission (CSRC), I extend our warm congratulations on the meeting and would like to take this opportunity to share some of my views.
1. Being fully aware of the national attribute of stock exchanges
Globally, stock exchanges in every country are carriers of national and citizen interest. As the core platform of the capital market, stock exchanges play an important and irreplaceable role which is directly related to the steady operation of a country’s financial market, the wealth of a country’s residents, economic development and social credibility, confidence and trust, as well as the safe operation of a country’s economic system.
The CPC Central Committee and the State Council have always attached great importance to the construction and development of stock exchanges. Both Shanghai Stock Exchange and Shenzhen Stock Exchange are China’s two statutory special institutions on which more than 100 million investors participate in trading currently. Consequently, they are directly related to the wealth and interest of more than 100 million families, involving several hundred million people. To run stock exchanges properly and protect investors according to law, especially the legitimate rights and interest of small and medium investors, is the inevitable requirement and concrete embodiment of carrying out the CPC’s development thoughts that center on the people.
According to Articles 102 and 105 of the Securities Law, stock exchanges adopt a membership system. All of you who gather here today as member representatives are investment bankers and experts in various professional areas, and also leaders of financial institutions. We must all have passion for our country and assume the responsibility of our time. This is the real politics, and the real overall situation. Today, no finance can be independent of politics, and no politics can ignore finance. Stock exchanges and securities institutions should enhance their political stance, solidly establish the “Four Consciousness”, and become a vanguard force in resolutely implementing the decisions of the CPC Central Committee and the State Council, an essential force in practicing the new development ideas, and a trustworthy force for various market participants and investors.
Presently, China’s capital market maintains steady operation. This situation is hard-earned and should be cherished. This year, the 19th CPC National Congress will be held, which is the top priority in the political life of our party and our country. There will be many major events and sensitive moments this year. The task to reform and develop the capital market is exceptionally arduous, while we are faced with complex international economic and financial situations. All of us must pull together to maintain the steady operation of the capital market.
2. Stock exchanges are important regulatory bodies of the capital market
The functional positioning of the stock exchange evolves along with the development of the market economy. Currently, the stock exchange is far from its original positioning as a simple venue for securities issuance and trading. Since I took office in the CSRC, I have spent much time studying relevant laws and regulations such as the Securities Law, including carefully going through relevant articles of the Securities Law in relation to stock exchanges. I’ve finally come to realize that the stock exchange is not only a statutory venue for trading securities but also a statutory regulatory body. The entire Section II of Chapter III of the Securities Law provides for the supervision of securities listing and delisting, and grants the final decision right to the stock exchange. The title of Chapter V of the Securities Law is precisely “Stock Exchange”, and this chapter includes 20 articles and clearly sets forth its organization and supervisory function. For example, Articles 114 and 115 regulate the real-time monitoring right regarding securities transaction, restriction right regarding abnormal transaction, supervision right regarding information disclosure by listed company, and decision-making right regarding temporary market closure or trading suspension. There is actually massive amount of connotation in this. Here, we can find all the bases for the stock exchange’s main duties of front-line supervision. Article 121 specifies the disciplinary sanction right, i.e., the stock exchange has sufficient legal authority to take regulatory measures such as revoking the qualification of personnel who conduct transactions on the stock exchange in serious violation of the trading rules, and banning them from the stock market. Article 118 of the Securities Law stipulates that the stock exchange shall, in accordance with the securities law and administrative regulations, develop listing rules, trading rules, member management rules and other relevant rules and submit them to the securities supervision and administration authority under the State Council for approval. My understanding is that this article in fact grants the stock exchange the power to conduct all-round supervision of the market by formulating rules.
In my opinion, the authority granted by law to the stock exchange is not only in line with the institutional arrangement commonly adopted in the development and supervision of the international capital market, but more importantly, it demonstrates the confidence and great trust put in the stock exchange by our party and country regarding the front-line supervision. The stock exchange has both the legal duty to conduct real-time, panoramic market monitoring and the natural advantage of being close to various market participants, so it reflects the inherent logic of market operation and regulation for the stock exchange to assume the front-line supervision responsibility. Different from administrative supervision and general self-regulation, the supervision function granted to the stock exchange by law is extensive, diverse and effective, and can better achieve the goal and direction of market operation. The stock exchange must take the initiative to exercise the comprehensive supervision function according to the law, including substantive supervision regarding company listing, delisting, and M&A and restructuring. This is not that the exchange abuses its function; rather, it is performing its due function according to the law. Another example is the supervision of intermediaries. Whether it is a listed company, member of the exchange, or any other intermediaries that engage in securities business, such as an accounting firm, the exchange must have relevant rules to regulate them. Anyhow, all the players in the market must be subject to the supervision of the exchange without exception.
Front-line supervision is the statutory duty granted to the exchange by the Securities Law, and supervision is the statutory principal work of the exchange. The exchange has both the authoritative nature of a statutory organization and the flexibility of self-disciplinary regulation. The exchange should act bravely and assert its right to protect the authoritativeness of statutory supervision, and through utilization of the flexibility of its own rules, crack down without mercy on behaviors that disrupt market order. Listed companies are listed on the exchange, investors trade on the exchange, members are affiliated with the exchange, and information is disclosed through the exchange. Therefore, the exchange is duty-bound to maintain market order, and members of the exchange are duty-bound to maintain market stability. The exchange market is a “pot we all eat from”, and if the pot is broken, none of us can be well fed. All the members of the exchange should actively respond to and implement the requirements of front-line supervision, and jointly maintain market order.
3. The exchange and its members must serve the national overall development strategy
The capital market must be designed and planned in a way that it facilitates the implementation of the new development concepts and the structural reform of the supply side. The exchange must play well the role of a hub, gathering the strengths of its members and the market, take the initiative to align with the national strategy, support enterprise reform, development and scientific and technological innovation, and increase the proportion of direct financing. Furthermore, it should always adhere to market-oriented, legal and internationalized reform direction, steadily promote two-way opening-up, and deepen ties with global major exchanges in multiple forms such as connection of trading facilities, cross-listing of products, technical cooperation, shareholding and joint venture so as to develop its global presence in a gradual way.
As members of the exchange, investment banks should come back to their basics by focusing on their primary business, and be honest and be angels. Certified public accountants and accounting firms engaged in the securities business should act as the “gatekeeper” to keep inferior companies from entering the capital market. Exchanges, investment banks and accounting firms should make joint efforts to support the M&A and restructuring and resource integration of listed companies to help them become better and stronger. We need to shorten the service chain and reduce financing cost. We need to enable the majority of investors and various enterprises to benefit from the dividend of the capital market.
At this assembly, the new board of directors and the new board of supervisors will be elected. The new leadership team should have new concepts and make new achievement. The CSRC will strongly support the exchange in reform and development and in performing the front-line supervisory duty according to the law, maintaining steady market operation, serving the development of real economy, and protecting the legitimate rights and interest of investors so as to create a bright future of the capital market and greet the 19th CPC National Congress with outstanding work.
Finally, wish the assembly a great success.
Thank you.
