Shanghai and Shenzhen Bourses Clarify Rules for Bank Participation in China’s Exchange-traded Bond Market

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The Shanghai and Shenzhen Stock Exchanges have issued new directives providing greater clarification on the requirements for banks participating in the Chinese exchange-traded bond market.

On 15 January the two bourses issued the “Notice on Matters in Relation to Settlement of Bond Transactions on the Shanghai Stock Exchange in which Banks Participate” (关于银行参与上海证券交易所债券交易结算有关事项的通知) and the “Notice on Matters in Relation to Settlement of Bond Transactions on the Shenzhen Stock Exchange in which Banks Participate” (关于银行参与深圳证券交易所债券交易结算有关事项的通知).

The Notices allow a broad range of banks in China to participate in auction transactions of bonds and asset-backed securities on both exchanges, including:

  • Policy banks,
  • Big state-owned banks,
  • Joint-stock banks,
  • Municipal banks,
  • Foreign-invested banks,
  • Other domestic listed banks.

Banks applying to participate directly in bond transactions must satisfy the following conditions:

  1. Net-assets of over 10 billion yuan for the most recent accounting year, and “comparatively active” bond transactions;
  2. Possession of a trading team which possesses rich bond investment and management experience;
  3. Related operations management systems, risk management systems, and technical systems that can support the undertaking of bond transactions;
  4. Possession of comparatively sound ongoing business capability, and no major illegal incidents in relation to bond transaction settlements for the past two years;
  5. Satisfaction of other conditions stipulated by the exchanges.

Products in which banks may transact include but are not limited to:

  • Sovereign bonds,
  • Local government bonds,
  • Financial bonds,
  • Government-backed bonds,
  • Enterprise bonds,
  • Corporate bonds (including convertible corporate bonds),
  • Asset-backed securities.

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