SZSE and CSDS amend measures on Stock Pledge and Repo Transactions


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With the permission from China Securities Regulatory Commission (CRSC), Shenzhen Stock Exchange (SZSE) and China Securities Depository and Clearing Corporation Limited (CSDS) announced that they have amended the Measures on Stock Pledge and Repo Transactions and Registration and Clearing (a trial version revised in 2017, hereinafter referred to as the Measures), and released the amended version on January 12, 2018 (hereinafter referred to as the New Measures), which shall take effect as of March 12, 2018.

From September 8 to September 22 of 2017, SZSE and CSDS were requesting public opinions on amendment of the rules and had received feedback from 73 parties at the end of the period. According to the feedback, market players generally hold that relevant amendments would help fortify the role of Stock Pledge and Repo Transactions in serving the real economy, prevent and control business risks and regulate business operation. The parties also offered advices and suggestions on specific provisions. After careful researches, SZSE and CSDS adopted some of the suggestions: first, specifying that a dedicated account be opened by financing parties in a bank designated by the securities companies so as to improve the operability and management of the dedicated accounts; second, allowing venture capital funds supported by certain policies to serve as financing parties with an aim to encourage innovation and entrepreneurship; third, improving the expression of some provisions.

Compared with the Measures, the revisions in the New Measure mainly fall into the following three aspects.

  • First, the position of the transactions is emphasized to serve the real economy. The measures specify that a financing party in the transaction must not be a financial institution or the product(s) issued thereby and that the funds so obtained shall only be used for production and operation of the real economy and be deposited and managed in a dedicated account; that the first transaction amount shall not be less than CNY5 million and subsequent transactions shall not be less than CNY0.5 million per transaction, and that funds and bonds are no longer qualified as initial pledges.
  • Second, risk control is further enhanced. The measures provided that the percentage of shares pledged shall not exceed 60%, that one securities company, as a fund provider, shall not accept more than 30 percent of A-shares of one single stock as pledges, and an assets management product shall not accept more than 15%, that the percentage of A-shares of a single stock pledged in the market shall not exceed 50%. Third, business operation is further regulated. Qualifications are specified for securities companies to conduct business, and securities companies are required to establish a racking and management mechanism for consistent management of credit risks of financing parties and purpose of the funds.

A relevant officer introduced that the principle “to separate the new and old” will be adopted to reduce the impact on existing business. Relevant amendments will only apply to new contracts, while the old measures shall apply to the performance and renewal of existing contracts and there is no need for termination in advance. Before the implementation of the New Measures, securities companies are expected to improve and optimize internal management systems in time as requested, revise business agreements, transform their technical systems and properly carry out the work on investor education and rules interpretation, so that the rules might be implemented successfully.

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SZSE and CSDS amend measures on Stock Pledge and Repo Transactions

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