Q: Today, the Shanghai Stock Exchange (SSE) announced the revisions to the “SSE Trading Rules” and the “SSE Detailed Rules for Implementation of Bond Trading”. What are the amendments and the main concerns?
A: In order to improve the management of the exchange-traded bond repo business, with the approval of the China Securities Regulatory Commission (CSRC), the SSE has made amendments to the “SSE Trading Rules” and the “SSE Detailed Rules for Implementation of Bond Trading”, and the new rules will come into force on May 22, 2017. The adjustments to the new rules mainly involve two aspects: the first is revising the interest-bearing rule for the collateralized repo, as the number of the interest-bearing days is changed from the nominal days of the repo term to the actual days of the outstanding funds, so as to eliminate the drastic volatility of the repo rates caused by the factor of holidays and weekends under the rule of the number of nominal interest-bearing days, and at the same time the number of interest-bearing days in a year is shifted from 360 days to 365 days; the second is modifying the calculation method of the closing price for collateralized repo, as it is altered from the volume weighted average price of all transactions in one minute before the last transaction on the very day to that in one hour, in a bid to improve the stability of the closing prices of repos.
In recent years, with the trading volume of exchange-traded bond collateralized repos continuously increasing, the exchange-traded repo market has seen the group of participants expanding constantly. To better serve the market participants, the SSE has worked with China Securities Depository and Clearing Co., Ltd. in improving the management of the repo business, and the new rules have optimized the interest-bearing rule for repo and the calculation method of the closing price. The implementation of the new rules will strengthen the stability of the repo rates on the exchange-traded market and help investors better participate in the exchange-traded repo market. Next, the SSE will further improve the structure of investors of the collateralized repos, enhance the repo product line and promote the healthy and steady development of the repo market.
Source: Shanghai Stock Exchange