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On January 22, SZSE officially issued No. 1 Guidelines of Shenzhen Stock Exchange for Securities Investment Fund Business - Index Fund Development (the Development Guidelines), which came into effect on 1 February, 2021. This is an important institutional arrangement for further improving index fund regulation rules, giving better play to the attribute of the index fund as an asset allocation tool and effectively promoting the healthy and stable development of the fund market.
The Development Guidelines stipulate the responsibilities of index fund managers, underlying index quality, index fund development procedures and position opening. First, the responsibilities of index fund managers are further defined, i.e., when the fund managers apply for developing index funds, they shall make preparations in aspects of staffing, business rules and technical system. Second, the underlying index quality indicator is specified. Specific requirements are raised on the underlying index of the index fund in terms of number of constituents, distribution of weights, index operation time and liquidity. Based on the principle of “applying different policies for previous and new businesses”, the index funds that have been verified by or registered with China Securities Regulatory Commission (CSRC) before the effectiveness of the Development Guidelines are not subject to the above-mentioned indicators. Third, fund development procedures are regulated. Fund managers shall submit index preparation schemes, description of index compliance with specific indicators, commitment and other materials when applying to SZSE for developing an index fund. SZSE will issue a no comment letter for qualified application. Fourth, fund position opening requirements are specified. The position shall be opened before the listing of an index fund to make its portfolio ratio comply with relevant laws, regulations, departmental rules, normative documents and fund contracts and reflect the basic characteristics of the index fund tracking indicator.
Between 30 July and 14 August, 2020, SZSE solicited public opinions with respect to the Development Guidelines. Overall, the regulatory arrangements in the Development Guidelines were basically recognized among market players, except for dissent from some index quality indicator requirements. With high attention, SZSE accepted some reasonable and feasible prevailing opinions and suggestions after earnest analysis and full demonstration and adjusted and refined the Development Guidelines accordingly, mainly including proper relaxation of the requirements on underlying index release time and constituent securities liquidity and clarification of index fund scope of interest rate bonds.
By the end of 2020, 487 fund products were listed on SZSE, with assets under management reaching CNY 266.9 billion. In the next step, SZSE will thoroughly implement the guiding principles of the fifth plenary session of the 19th CPC Central Committee and Central Economic Work Conference, further refine regulatory requirements for index funds according to the unified arrangements of CSRC, regulate operation process management, step up trading risk regulation and increase the proportion of index funds. In addition, it will guide the flow of medium and long-term funds into market, give full play to the function of resource allocation optimization, boost the steady and sound development of the fund market and build a product system that is more commensurate with innovative capital formation.
