About SSE Market Surveillance
According to Article 115 of Securities Law of the People’s Republic of China
and Article 38 & 39 of Measures for the Administration of Securities Exchange
, SEE are undertaking the responsibilities of securities trading frontline supervision. For this purpose, SSE have set up a special department－Market Surveillance Department, whose main function is ensuring timely detection, investigation, intervention and reporting in case of the occurrence of any unusual trading activities with the help of advanced transaction monitoring system, as well as supporting CSRC and other legal institutions to deal with the illegal activities in securities market, maintaining the market order and preventing potential market risk.
Currently, SSE Market Surveillance Department is exercising intense monitoring on the following three aspects:
1.Real-time monitoring: It mainly focuses on real-time monitoring on securities trading, conducting initial analysis on the alert messages sent from the monitoring system, detecting unusual trading activities and handing potential issues over to Investigation in time.
2.Investigation: It further investigates and understands the details about the unusual trading activities, determining whether they belong to illegal trading activities and the level of severity, as well as dealing with the relevant parties if needed in accordance with the related SSE trading rules via telephone communication, sending warning letters, summoning the parties involved for a talk, on-site visiting members and their branches etc.
3.Market Analysis: It conducts further analysis on the suspected insider trading, market manipulation and other illegal trading activities, summarizing a formal written report if necessary, which will then be submitted to CSRC; it also provides assistance to CSRC and its local agencies and other institutions involved by offering statistical data analysis on securities under investigation.
The flowchart on SSE Market Surveillance Department’s supervision of unusual trading activities is displayed as below: Chart 1: Supervision of Unusual Trading Activities
According to Chapter 6 of SSE Rules of the Exchange
, Market Surveillance Department can take self-regulatory approaches or measures on identified unusual securities trading activities based on the nature, level and frequency etc, including verbal or written warning, requiring relevant investors to provide a written commitment, summoning the parties involved for a talk, on-site visit and investigation, restricting trading under relevant securities accounts and so on. QFII Transaction Monitoring
Apart from the regular transaction monitoring, SSE also specifically focuses on QFII’s trading behavior in the following circumstances:
1.The unusual trading activities under a single QFII account, the unusual trading activities under a single QFII account with different underlying clients, the unusual trading activities between different QFII accounts, the unusual trading activities between QFII and its connected parties etc. It includes but not limited to manipulation of the opening or closing price, pulling or suppressing the security’s intraday price, large or frequent trades between QFII accounts and unusual block trading etc.
2.QFII accounts’ holding (buying or selling) volume exceeding the restricted proportion. It consists of all the QFII accounts as a whole on a certain security’s holding volume exceeding the restricted proportion, calculation of the QFII connected accounts’ holding volume in aggregation etc. There are mainly 2 ways to calculate the QFII connected accounts’ holding volume in aggregation. One is to sum up the holding of all the underlying clients’ accounts (no matter the number of brokers or type of accounts) under the same QFII account (with the same registration number). The other one is to sum up the holding of all the underlying clients’ accounts (as well as the connected parties) under distinct QFII accounts (with different registration number).
3.Market on Close (MOC) and other trading instructions. MOC is a market order that executed as close to the closing price as possible. MOC and other orders should be placed with no purpose of affecting the security’s trading price. QFII should sign the agent contract after reaching the agreement with its broker, and carefully execute such trading orders. If such orders may seriously impact the security’s trading price, QFII should stop executing immediately or transfer to the block trading platform.
If the above unusual trading behavior does exist on QFII, SSE will take certain supervision measures, including verbal or written warning and investigating, requiring QFII to provide written explanations, on-site visiting the agent brokers, summoning the parties involved （broker, custodian or QFII）for a talk, filing with CSRC for investigation and punishment etc, depending on the circumstances.