On November 6, the China Securities Regulatory Commission (CSRC) issued the "Guiding Opinions on Improving the System of Suspension and Resumption of the Stocks of the Listed Companies" (the Guiding Opinions for short), providing the principles, concepts and basic requirements for the trading suspension and resumption. Since the announcement, the Guiding Opinions has been widely recognized in the market, and it is generally believed that by reshaping the system, the regulator will be able to give better play to the role of the market mechanism, standardize the operations of the companies, and maintain the market order. The Shanghai Stock Exchange (SSE) will implement the requirements of the Guiding Opinions earnestly, revise the rules for trading suspension and resumption as soon as possible, and form and develop the long-term mechanism with no suspension as the principle and suspension as the exception, short-term suspension as the principle and long-term suspension as the exception, and intermittent suspension as the principle and continuous suspension as the exceptional.
1. The reform of the trading suspension and resumption has been deepened step by step, and the problems of untimely, frequent and long-time trading suspensions for the SSE-listed companies have been solved on the whole.
As a basic system in the securities market, the trading suspension and resumption of stocks is an important guarantee for maintaining market fairness and order. In recent years, under the guidance of the CSRC, the SSE has gradually developed and improved the trading suspension and resumption system. The special business rules were issued in 2014, and were revised in 2016 on the basis of the practice by reducing the reasons for suspension, compressing the suspension time, and intensifying the requirements for information disclosure. With the clear norms and guidance, the SSE has adhered to strict implementation and supervision, the SSE-listed companies’ behaviors of trading suspension and resumption have been effectively controlled, and the phenomena of untimely, frequent and long-time trading suspensions concerned earlier by the market have been fundamentally reversed.
In the second half of this year, the stock trading market has met with downward adjustments. With the coordination and deployment, the SSE has timely made corresponding regulatory arrangements according to laws and regulations. By strictly checking the matters that can be disclosed in phases, the SSE has prevented the possible impact of intensive trading suspensions on the market liquidity, and maintained the stable operation of the market. Recently, the number of the listed companies with trading suspended on the SSE has been reduced to about 10 on an average daily basis, accounting for about 0.7% of the total SSE-listed companies. Among the companies with trading suspension, some had the major asset restructuring matters that were complicated and time-consuming; some did have significant risks or major non-precedents with complex situations, resulting in some time of trading suspension approved for the companies so as to effectively protect the interests of the companies and the investors. The SSE will also urge relevant parties to speed up the progress in the major issues, vigorously defuse the risks, and resume the normal trading of the stocks as early as possible.
2. Consensus has been reached for the trading suspension and resumption, and the disclosure of major issues in phases is conducive to maintaining the stable operation of the market.
At the current stage, the SSE has achieved certain results in the regulation of the listed companies for the trading suspension and resumption, and the problems in the practice of trading suspension and resumption have been resolved to some extent, thanks to the system being consolidated continuously and advanced effectively as well as the consensus being gradually reached by the market participants. In recent years, the regulators have continued to strictly supervise insider trading, concept speculation, insincere restructuring and other disorders in an all-round manner according to law, and the market order has been significantly improved. At the same time, through institutional constraints and guidance, the handling of the trading suspension and resumption business for the SSE-listed companies has been increasingly prudent, the awareness of confidentiality has been continuously enhanced, the concept of replacing the trading suspension with information disclosure in phases has been gradually formed, and the protection of investors’ trading rights has drawn due attention. In the process, the market participants, especially the listed companies, have become more consistent in their understanding of the trading suspension and resumption, and the consensus in favor of fewer trading suspensions, short-time trading suspensions and temporary trading suspensions has been reached extensively. The changes have laid a solid foundation and provided effective guarantee for unloading the additional functions of trading suspension and resumption so as to restore the original purposes of the system.
At present, when planning major issues, the SSE-listed companies have taken the initiative to replace the trading suspension with timely information disclosure and comprehensive risk warnings. The practice shows that the overall performance of the market has been stable, there have not been any sharp ups and downs in the stock prices, and the matters planned by the companies have been advanced steadily. Since the beginning of this year, 29 SSE-listed companies have planned and pushed forward the restructuring matters through phased disclosure without the trading suspension. From the perspective of the stock trading on the secondary market, in the three trading days after publishing the announcements for planning restructuring, the 29 companies saw their stock prices rise by about 2.82% on average with the impact of the overall ups and downs of the market excluded. Specifically, 11 companies have disclosed their restructuring plans, and in the 3 trading days following the disclosure, their stock prices recorded an average increase of 2.77% with the impact of the entire market excluded. With regard to the progress made by the companies in propelling the matters, among the 29 companies, only 3 terminated the restructuring due to various subsequent changes, and most of them have progressed normally. These facts indicate that listed companies can advance major issues in accordance with the principle of phased disclosure with no or fewer trading suspensions, ensure the smooth operation of the market, maintain the necessary liquidity in the market, and safeguard the legitimate trading rights of the investors.
3. The SSE will effectively implement the Guiding Opinions issued by the CSRC and accelerate the revision of the rules for the trading suspension and resumption business.
The Guiding Opinions summarizes the practice in regulation of trading suspension and resumption in China's capital market in recent years. Based on the phased information disclosure, the Guiding Opinions has formed clear and definite principle and concept for trading suspension and resumption, and is the criterion for guiding the business in the next period of time. In the specific arrangements, the Guiding Opinions clearly requires reducing the reasons, compressing the time, strictly implementing the procedures and intensifying the obligation of information disclosure for trading suspension, and establishing the mechanism of linking the time of the trading suspension of a stock with excluding it from the constituent index and the system of information disclosure for trading suspension. In accordance with the requirements, the SSE will speed up and make effective efforts in the revision and improvement of the rules for suspension and resumption of trading.
At present, according to the requirements of the Guiding Opinions, the SSE has carried out the improvement and revision of the supporting systems, and will publicly solicit opinions as soon as possible. The main guidelines for the revision of the rules are to distinguish the types and impacts of the major issues of the listed companies and strictly implement the principle of phased disclosure. The listed companies shall directly disclose the ordinary matters, and compress the time of trading suspension and avoid long-time trading suspension for the issues with significant impacts and the real necessity of trading suspension. In addition, in order to intensify the responsibility for trading suspension and resumption, it is required that the chairman and the board of directors of the listed company should strictly implement the procedures and make prudent decisions, the controlling shareholders of the company and the participants in the major issue should vigorously provide support, and effective efforts should be made in the trading suspension and resumption as well as the information disclosure. The SSE will strictly regulate and investigate the abuse of trading suspension, the delay in trading resumption and other cases.