21jingji.com | SSE Streamlines and Optimizes Bond Business Rules to Facilitate Bond Financing

07 Mar 2023

From 21jingji.com

On February 13, 2023, the Shanghai Stock Exchange (SSE) announced that it had recently completed a phased streamlining and optimization of its bond business rules. This is an important step for the SSE to implement the registration scheme reform of the bond market, place equal emphasis on quality and efficiency, and serve the market.

The streamlining and optimization reduced the number of bond rules from 127 to 73, marking the beginning of a "concise, clear and friendly" bond rule system. Through the streamlining, the SSE attempts to create an open, transparent and predictable institutional environment for all market participants, and consolidate the institutional foundation for high-quality development of the bond market.

Zhang Rui, senior executive director of the Debt Financing Department of Guotai Junan Securities, said in an interview, "The SSE has implemented the requirements of the registration scheme reform, comprehensively formulating and improving supporting business rules for the corporate bond registration scheme. Taking the registration scheme reform as an opportunity, it has stimulated the vitality of market participants by optimizing services and simplifying the review process. At present, the SSE has formed a complete and independent rule system covering all lines of bond business, providing clear guidance for securities firms in the whole process of bond business. By further simplifying the review process, optimizing review guidelines, and clarifying information disclosure requirements and review priorities, this helps securities firms to better assist issuers in filing and registering bonds."

Enhancing convenience

Actively implementing the concept of registration scheme, the SSE has stepped up its efforts to "establish, revise, cancel and merge" rules with a "clear system and simple content". Through the review and merger of existing bond business rules, it has built a rule system with "four lines and three levels" that conforms to the reality of the bond market and facilitates market entities.

"Four lines" refers to dividing rules according to the content of bond business to form four segments, i.e. issuance and listing review, issuance and underwriting, listing, and trading management; "Three levels" refers to simplifying rule levels from the perspective of rule effectiveness to build three main rule levels, i.e. basic business rules, application guidelines for rules, and business guides. The streamlined and optimized rules have been published on the SSE's official website for direct inquiry and use by investors, which effectively enhanced the standardization and transparency of the SSE's bond business.

"We submitted an application for Shanghai Lujiazui (Group) Co., Ltd. to publicly issue corporate bonds to professional investors in 2022 and received the registration approval within a month, greatly facilitating issuers' bond financing." Zhang Rui said.

This is learned that since the registration scheme reform of the bond market, with a view to serving the real economy, the SSE has continuously optimized and streamlined rules related to corporate bonds. Focusing on industry features and market concerns, it has made the following efforts:

The first is to guide the bond financing of industrial enterprises according to categories and industries, direct the raised funds to areas in line with national strategies and industrial policies, and constantly promote the innovation of bond varieties, so as to improve the accessibility and convenience of industrial enterprises in bond financing.

The second is to enhance the efficiency of bond financing for quality enterprises, focus on entities to steadily broaden the range of well-known and mature issuers, keep increasing the efficiency of review, and optimize the requirements for document signing and financial disclosure, thus contributing to the high-quality development of the bond market.

The third is to formulate and publish the review standards and concerns for urban investment enterprises, strictly implement the requirements of preventing and resolving the hidden debts of local governments, and specify the standards and disclosure items according to different operations and business scales of urban investment enterprises, thereby promoting the structural transformation of urban investment bonds.

The fourth is to focus on risk characteristics and reveal negative situations in the issuer's industry, such as policy changes, governance failure, aggressive production and operation, significant abnormal financial performance indicators, excessive high-leverage financing, etc., to delineate the bottom line of risks and protect the legitimate rights and interests of investors.

Officials of CITIC Securities Company Limited said, "Since the SSE streamlined and optimized its bond rules, the registration, issuance and trading requirements for corporate bonds have been systematically optimized with the upgrading and updating of regulations. While comprehensively implementing the spirit of the registration scheme, fulfilling the information disclosure obligations of issuers and intermediaries, and fully protecting the rights and interests of investors, this has further clarified the whole-process operational path of corporate bonds, further enhanced the transparency and readability of regulatory rules, provided issuers, intermediaries and investors with a wide range of convenience to participate in the corporate bond business, and constantly raised the enthusiasm of all entities involved in the business."

Leveraging the role of asset securitization market

It is worth noting that the SSE has completed its public consultation on the Asset-backed Securities Business Rules to provide comprehensive and fundamental rules for the whole process of the product, which has received wide attention from institutions.

Since 2022, a "1+4+N" rule system has been gradually formed for asset-backed securities businesses to bring into play the functions of the asset securitization market and revitalize existing assets. As the SSE completed its public consultation on the Asset-backed Securities Business Rules, it has recently issued four business guidelines:

The first is to focus on information disclosure to clarify the requirements for information disclosure of application documents and verification by intermediaries, so as to strengthen the market's endogenous constraints; The second is to standardize the access criteria for seven basic assets of three major categories, i.e. creditor's rights, future operating income and real estate mortgage, clarify the key issues of major assets such as small loans on the Internet, future earning rights with weak bankruptcy isolation effect, and supply chain involving entity risks and hidden dangers, strengthen asset credit and bankruptcy isolation arrangements, and enhance issuance access supervision; The third is to clarify the hierarchical and categorized supervision mechanism for asset-backed securities projects to improve the financing efficiency of quality projects; The fourth is to standardize the access requirements for eight specific varieties of asset-backed securities to increase the support for national strategies.

According to officials from the Asset Management Structured Financing Department of Huatai Securities, Guideline No. 2 on asset securitization specifies the review requirements for three major categories and eight sub-categories of assets, which provides a better understanding of the requirements on entities allowed, asset screening, risk control and information disclosure; Guideline No. 3 practices the concept of promoting good assets and limiting bad assets to guide market institutions to explore high quality assets and promote the high-quality development of the bond market; Guideline No. 4 specifies the requirements for asset securitization projects in seven specific encouraged areas, better instructs market institutions to explore underlying assets in line with policy guidance, further enriches the types of assets in the asset securitization business, and gives play to the important role of finance in supporting the real economy.

Officials of CITIC Securities hold that, "In terms of asset-backed securities, the SSE has comprehensively sorted out guidelines on the application of rules for confirmation of listing conditions, standardized the requirements for document preparation, asset review, classification review process and specific varieties identification of asset securitization products, optimized the system design, and guided enterprises and intermediaries, such as plan managers, to actively participate in and build the market through open, transparent and predictable system and rules."