New regulations for A-shares! Starting today, they are officially implemented! Regarding short-term trading

Source: Securities Times Network | Author: Liu Yiwen

To implement the short-swing trading regulatory system stipulated in the Securities Law and to facilitate medium- to long-term capital entering the market, the China Securities Regulatory Commission (CSRC) has formulated and issued the Several Provisions on the Regulation of Short-Swing Trading (hereinafter referred to as the “Provisions”), which shall come into effect on April 7, 2026.

Industry insiders believe that, for ordinary investors, the new rules mean that the market’s “rules of the game” are fairer and more transparent. Those attempting to use loopholes to engage in insider trading and short-term speculation will face more stringent constraints.

Further clarifying short-swing trading regulatory arrangements for controlling shareholders and others

Based on a systematic review of domestic and overseas legislation, judicial practices, and regulatory practices, the Provisions respond to market concerns and further clarify the regulatory arrangements concerning short-swing trading by controlling shareholders and directors, supervisors, and senior executives. The Provisions consist of twelve articles, and the main content includes multiple aspects.

First, it clarifies the scope of applicable subjects and types of securities. In terms of short-swing trading subjects, it brings within the regulatory scope those who, at the time of purchase and sale, hold the identity of controlling shareholders or directors, supervisors, and senior executives, and those who do not have a specific identity at the time of purchase but do have such an identity at the time of sale. The securities involved include stocks and depository receipts, exchangeable corporate bonds (hereinafter referred to as “exchangeable corporate bonds”), convertible bonds, and other equity-type securities.

Second, it clarifies the standards for determining and calculating holding and transaction time points. In light of regulatory practices, it sets out a series of determination and calculation standards, specifically including:

First, the buy and sell time points are determined based on the securities transfer registration date.

Second, for controlling shareholders with shareholding proportions of more than 5%, the proportion is calculated by combining the shares issued or listed and publicly transferred within and outside the territory by the same listed company and the same National Equities Exchange and Quotations (NEEQ)-listed company.

Third, shareholdings of more than 5% held by Hong Kong Securities Clearing Company Limited as a nominee under the Stock Connect (mutual market access) mechanism are not recognized as those of controlling shareholders.

Fourth, the securities involved in short-swing trading are not aggregated across different security categories for calculation.

Fifth, the same offshore investor shall aggregate the quantities of securities it holds through qualified offshore institutional investors, RMB-qualified offshore institutional investors, foreign strategic investors, and the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect mechanisms for calculation.

Third, it stipulates exempt application circumstances. It clarifies 13 exempt circumstances, mainly covering three categories:

First, where, according to product or business system design, the market has clear expectations for the relevant business links and support is needed to develop the business—for example, preferred stock conversion; convertible bond conversion, conversion, redemption, repurchase; exchangeable corporate bond conversion, redemption, repurchase; ETF subscription, application, redemption; grant, registration, and vesting related to equity incentives; market-making business; and so on.

Second, changes in shareholding caused by objective non-trading factors, such as compulsory judicial enforcement, inheritance, donation, and free transfers of state-owned shares, etc.

Third, transactions conducted in accordance with regulatory provisions, or for the purpose of responding to major financial risks and maintaining financial stability, as required by law and in an orderly manner—for example, fraudulently issuing and being ordered to repurchase, or being ordered to repurchase due to illegal reductions of holdings, etc. To prevent the use of exempt circumstances to evade regulation, the Provisions clarify that if the above actions involve seeking illegal benefits by taking advantage of information advantages, they will not be exempted.

Finally, it clarifies institutional application arrangements. For the three types of circumstances in which professional institutions manage the matters and securities accounts are opened separately by product or portfolio, the holdings shall be calculated separately by product or portfolio’s one-code-one-account:

First, domestic public funds, the National Social Security Fund, basic pension insurance funds, annuity funds, insurance funds, etc.

Second, pooled private asset management products managed by securities and futures fund management institutions, and private securities investment funds that meet regulatory requirements.

Third, offshore public funds that participate in domestic securities trading through qualified offshore investors and the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect mechanisms, and that report the corresponding northbound holdings of the relevant products as required. To prevent the use of this measure to evade regulation, the Provisions clarify that for the above products or portfolios, if they cannot operate independently in a compliant manner or if there are conflicts of interest, violations of laws and regulations, or other circumstances during the course of trading, the number of securities held will not be calculated separately.

Securities lending and borrowing via transfer is not an exempt circumstance

Article 6 of the Provisions adopts the form of a “list of exemptions,” enumerating 13 circumstances that do not constitute short-swing trading, which are mainly divided into three major categories.

It is understood that, in the 2023 draft for soliciting public comments, “conducting securities lending and borrowing via transfer in accordance with the Interim Measures for the Supervision and Administration of the Transfer Lending Business, and lending and returning shares or other equity-type securities” was listed as an exception, but this exception has been deleted in the 2026 new rules.

Jia Yuan Law Firm said that this change may be due to the fact that in practice, some listed company shareholders may indirectly reduce their holdings through the securities lending and borrowing via transfer business—by lending their shares through transfer lending, thereby indirectly achieving a “temporary transfer” of shares. Out of prudence, when determining whether it constitutes short-swing trading, securities lending and borrowing via transfer transactions should also be treated as “sales.”

The 2026 new rules clearly stipulate that buy transactions resulting from violations in connection with the CSRC’s order to repurchase or to purchase back (i.e., ordered repurchase/ordered buyback) reduced holdings, or from a violator’s voluntary buyback of illegally reduced holdings, do not trigger short-swing trading. At the same time, it newly adds exemptions for transactions carried out in accordance with law to address major financial risks and maintain financial stability. Jia Yuan Law Firm stated that the above exemption circumstances establish a “illegal reduction of holdings—ordered buyback” logic closed-loop. In the past, when shareholders were ordered to buy back, they might worry that the buyback itself would again constitute short-swing trading; the 2026 new rules completely eliminate this compliance paradox.

As for applicable subjects, Article 8 of the Provisions clearly states that the securities involved in the determination of short-swing trading include securities held by directors, supervisors, senior executives, and natural-person shareholders, as well as securities held by their spouses, parents, and children, and securities held using other persons’ accounts.

Dacheng Law Firm said that this means that the “key minority” not only needs to manage their own securities properly, but also strengthen the management of securities accounts of family members, so as to avoid violations caused by mistakes by close relatives. For securities held by spouses, parents, or children of investors with specific identities, the Provisions clarify that they are unconditionally deemed to be securities held by the investors themselves based on the relationship of identity. For securities held by other third parties who are not close relatives, however, they must constitute “holding through other persons” in order to be aggregated for calculation, which will present significant difficulty in evidence collection where the two parties had colluded in advance, posing challenges to securities administrative enforcement.