Zhu Congjiu Of The Shanghai Stock Exchange: Exchanges And Depositories To Play Simpler Role

Zhu Congjiu of the Shanghai Stock Exchange (SSE) said yesterday in Beijing that exchanges and depositories' administrative powers and their functions of supervision over state-owned assets should be peeled off or be imposed on special treatment. As the market infrastructures, they should pay more attention to improving their services.

At the 11th Annual Meeting of the Asia-Pacific Central Securities Depository Group, Zhu said that exchanges and depositories should enhance their services in the future. "However, considering China's transitional economy, exchanges and depositories are given the powers to manage state-owned assets when they provide services or conduct businesses. This has put them into dilemma. On the one hand, they must ensure investors' easy disposal of assets when providing services. On the other hand, they should take the supervision responsibilities during their management of state-owned assets, which has inconvenienced the securities holders to dispose of their assets." Zhu suggested that exchanges and depositories' administrative powers be peeled off or be imposed on special treatment, so that they can pay more attention to improving their services as the market infrastructures.

Meanwhile, China's current market system is inclined to front control of market risks. "Such a method is dangerous in the long run," said Zhu. Since exchanges and depositories take charge of the front control, the market may take it for granted that exchanges and depositories will take all the responsibilities in case of risks. "But it is a misunderstanding of our system." The risks of the market, clients and intermediaries should be taken and solved by all market participants rather than the exchanges and depositories. Otherwise, it is prone to damage the safety of the whole financial system. "In the future, intermediaries and clients should be able to undertake the risks, with the market system to dispel the risks. Moreover, exchanges and depositories should devise a safe and efficient risk management framework and promote the effective implementation of the framework through establishing a reasonable system."