SSE Launches New Bond Trading System Independent of Stocks

The official launch of the new bond auction platform of the Shanghai Stock Exchange (SSE) on December 20, 2021 transferred the auction trading of cash bond products and collateralized repos of bonds from the former auction-based matching platform to the new platform. Thus the SSE’s stock and bond trading systems have been independent of each other, and the auction trading, the agreement-based trading, the collateralized repos and other bond-related businesses in the SSE market now operate independently under the new bond trading system, and the smooth separation between stocks and bonds in terms of trading systems has been completed. After the launch of the new platform, as of December 23, an average of 5.82 million cash trading orders and 855,000 collateralized repo orders were placed each day. The core trading system was running smoothly and all bond transactions were settled in a normal and orderly manner.

The construction of the new bond trading system, an important measure by the SSE, aims to implement the requirements for high-quality development of the bond market and advance the construction of the secondary market for bonds. In 2019, under the guidance of the China Securities Regulatory Commission (CSRC), the SSE initiated the development of a new bond trading system by joining hands with the China Securities Depository and Clearing Co., Ltd. (CSDC), together with member institutions and other market participants. In general, in accordance with the principle of step-by-step implementation and steady progress, the initiative has been completed in three stages, namely the transfer of the non-trading bond business from the former auction-based matching platform to the integrated business platform, the transfer of block trading of bonds from the integrated business platform to the fixed-income platform, and the recent switch to the auction trading platform. The three-year construction of the new bond trading system will provide solid technical support for the high-quality development of the SSE’s bond market.

First, the “separation between stocks and bonds” is achieved, and the strong coupling of stocks and bonds is eliminated. The former trading system of the SSE was an integrated auction-based matching platform serving stocks, bonds and other transactions. With the vigorous development of the capital market, the stock and bond markets have gradually developed different features. The construction of the SSE’s new bond trading system will provide the technical basis for bond market reform, avoid mutual interference between the two systems, improve the overall level of safe operation, and provide an important guarantee for promoting the connectivity of bond trading and implementing the SSE’s various reform and innovation tasks.

Second, provide more convenience to bond trading participants, and improve services. Compared with stock trading, bond trading is characterized by large transactions, low frequency, and variety of needs. Following the rules of the bond market and catering to its needs, the new bond trading system will provide bond trading participants with trading modes and trading platforms that are in line with the characteristics of bond products, and offer more efficient technology services to trading participants in submission and matching of orders, data distribution, and other procedures. All this aims to continuously improve the trading experience of market participants, and enhance customer loyalty.

Third, improve the variety of bond products for trading, and strengthen the construction of the secondary market for bonds. Liquidity is the vitality of the secondary market for bonds. With the launch of the new bond trading system, the SSE will focus on enhancing market liquidity and improving trading efficiency. To achieve this end, the SSE will strive to improve bond trading, increase bond trading participants, and effectively promote mechanism optimization and implementation of innovative products, including exploration in market-making mechanism for bonds and improvements in collateralized repos, so as to further enhance the liquidity of the secondary market.

Fourth, promote the technological self-sufficiency of the exchange, and explore the way for the construction of a new-generation trading system. The new bond trading system is a matching system that the SSE has built by adopting the X86 technological framework for the first time. Through independent research and development of the core system, the SSE strives to construct a piece of safe and stable, technologically advanced, flexible and easy-to-use trading infrastructure, not only achieving significant improvements in performance indicators such as latency, but also accumulating valuable experience for the exchange to build a fourth generation (G4) trading system based on its own technology.

Going forward, the SSE will effectively ensure the safe operation and continuously optimize the bond trading mechanism and operation mode. At the same time, the SSE will actively promote the sorting and integration of the new bond trading rules system, continuously improve the bond market infrastructure and basic system construction, enhance the price discovery function of the secondary bond market, better meet the needs of investors, and promote the high-quality development of the SSE bond market to a new level.