In order to further highlight the orientation of the collateralized repo transactions of shares toward serving the real economy, prevent and control business risks and standardize the business operation, approved by the China Securities Regulatory Commission (CSRC), the Shanghai Stock Exchange (SSE) and China Securities Depository and Clearing Corporation Limited (CSDC) have jointly issued the “Measures for Transaction, Depository and Clearing Businesses of Collateralized Repo of Shares (2017 Draft for Comment)” to solicit public opinions.
According to an official, the amendments are mainly in three aspects: first of all, the service for the real economy is further highlighted. It is stipulated that the financed side shall not be the financial institutions or the products issued by them, the raised fund shall be used for production and operation in the real economy and be managed in special accounts, the financed side’s first transaction amount shall not be less than RMB5 million, and the following transactions shall not be less than RMB500,000 each time, and the funds and bonds will no longer be recognized as the initial pledged underlying. Secondly, the risk management is further strengthened. It is stipulated that the upper limit of the stock pledge rate is 60%, a single securities company or a asset management product as the financing side shall not accept more than 30% and 15% respectively of the total shares of a single A stock for stock pledge, and the overall pledge for a single A stock in the market shall not be more than 50% of the total shares. Thirdly, the business operation is further standardized. The qualification for the securities companies to conduct the business is specified, and the securities companies are required to set up the mechanisms for sustained credit risk management and fund usage track management of financed sides.
It is necessary to note that in order to reduce the impact on the existing businesses, the principle of "separating the new and the old" shall be applied. The above amendments only apply to the new contracts, and the existing contracts can operate and be extended according to the original rules, with no need to settle in advance.
The official added that the amendments to the rules is a specific move to implement the requirements put forward at the National Financial Work Conference, put into practice the requirements of the mid-year regulation work symposium of the national securities and futures regulatory system, and make effective efforts in the three tasks of the capital market serving the real economy, preventing and controlling risks and deepening reform. The deadline of the opinion solicitation is September 22, 2017. The SSE and CSDC will fully listen to all market participants’ comments, improve the rules and relevant arrangements, and issue and implement the rules approved by the CSRC.
Source: Shanghai Stock Exchange