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In conjugation with the implementation of the "Trial Rules on Corporate Bonds Issuance" of the China Securities Regulatory Commission (CSRC) and the "Corporate Bonds Listing Rules" of the Shanghai Stock Exchange (SSE), the "Notice of Issuance, Listing and Trading of Corporate Bonds" released by the SSE (September 20) has stipulated in detail every link in the issuance, listing and trading of corporate bonds during the trial period.
According to the notice, the corporate bonds are issued by both online and offline issuance in principle during the trial period. Online issuance refers to open issuance of corporate bonds of a certain proportion to social public investors through the SSE auction trading system at the fixed issuance price and interest rate. During the trial period, online corporate bond issuance is free from issuance commission charge, and the face value per subscription unit for online issuance is at RMB1,000.
Concerning the spot trading of corporate bonds, the notice specifies that, during the trial period, spot trading of corporate bonds can be conducted simultaneously through the auction system and the comprehensive electronic platform of fixed income securities, with the same stock code and short description. The trading will be ordered according to the securities account, and will be traded at clean price and settled at full price. For spot trading of corporate bonds by way of asks and bids on the electronic platform, the amount of asks and bids for each deal should be 1,000 lots or of its integral multiples, and the asks and bids should be concluded deal by deal for each 1,000 lots. Corporate bonds purchased through the auction system (electronic platform) on the very day can be sold out through the very system (platform) on the same day, or through the electronic platform (auction system) on the next trading day. Primary dealers of the electronic platform may apply to the SSE for market making of corporate bonds listed on the electronic platform as well as contractual trading with their clients.
Corporate bonds meeting one of the following qualifications can be used as pledged bonds of the new general collateral repos: the corporate bonds issuers with enterprises subject to the central government with sole state ownership; the corporate bonds guaranteed with full-amount, unconditional and irrevocable joint and several liabilities or full-amount pledged assets by one of the following banks – Industrial and Commercial Bank of China Limited, Bank of China Limited, China Construction Bank Co., Ltd., Agricultural Bank of China Co., Ltd., Bank of Communications Co., Ltd. and China Development Bank; both corporate credit rating and bond credit rating are AAA level; other corporate bonds approved by the China Securities Regulatory Commission.
According to the notice, the corporate bonds issuers should fulfill the obligation of continual information disclosure in accordance with relevant regulations in the "Corporate Bonds Listing Rules". If the issuers see significant events that have or may have influence on corporate bonds' repayment of principal and payment of interest, the SSE can suspend corporate bonds' spot and repo trading if necessary. If the issuers are the SSE-listed companies whose stocks are being suspended, the SSE can make a decision on suspending corporate bonds' spot and repo trading if necessary, and the trading will be resumed on the next trading day after parties concerned make an announcement. The SSE will also implement real-time supervision over corporate bonds' trading. Corporate bonds trading, with abnormal fluctuation or suspected of violating laws and regulations, will get compulsory special trading suspension yet to be made public. Duration for and ways of trading suspension and resumption reside in the decision by the SSE. Abnormal trading and other violations of laws and regulations will be dealt with in line with SSE's rules and regulations.
Besides, the notice also requires members and other institutions engaging in bond trading to establish mature business management system and risk control mechanism when engaging in corporate bonds business. To take part in corporate bonds trading, they shall implement account balance control and short sale is not permitted.
