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 supervision and regulation system as stipulated in the Securities Law, and to facilitate medium- and long-term capital to enter the market, the China Securities Regulatory Commission has formulated and issued the “Several Provisions on the Supervision of Short-Swing Trading” (hereinafter referred to as the “Provisions”), which will come into effect on April 7, 2026.

Industry insiders believe that, for ordinary investors, the new rules mean that the market’s “game rules” will be fairer and more transparent. Those attempts to conduct insider trading and short-term speculation by taking advantage of loopholes will face stricter constraints.

Further clarify short-swing trading supervision arrangements for major shareholders, etc.

Based on a comprehensive review of domestic and overseas legislation, judicial practice, and regulatory practice, the Provisions respond to market concerns and further clarify the relevant regulatory arrangements for short-swing trading by major 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. Regarding the subjects of short-swing trading, those who, at both the time of buying and the time of selling, have the identity of major shareholder or directors, supervisors, and senior executives, and those who do not have a specific identity at the time of buying but have such identity at the time of selling, are included within the scope of regulation. The Provisions clarify that the securities involved include stocks and depositary receipts, exchangeable corporate bonds (hereinafter referred to as “exchangeable bonds”), convertible bonds, and other equity-type securities.

Second, it clarifies the identification and calculation standards for shareholding and trading time points. In light of regulatory practice, it clarifies a series of identification and calculation standards, specifically including:

One is that the time of buying and selling shall be determined based on the securities transfer registration date.

Two is that the major shareholder’s shareholding ratio of more than 5% shall be calculated by aggregating the shares that have already been issued or listed and publicly transferred within and outside the territory, for the same listed company and a company listed on the National Equities Exchange and Quotations (NEEQ).

Three is that shares held through the Hong Kong Securities Clearing Company Limited as a nominee holder under the cross-border connect mechanism, where the shareholding exceeds 5%, are not to be recognized as that of a major shareholder.

Four is that the securities involved in short-swing trading shall not be aggregated across different categories for calculation.

Five is that the same overseas investor shall aggregate the number of securities it holds through qualified overseas institutional investors, RMB-qualified overseas institutional investors, foreign strategic investors, and the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect mechanisms.

Third, it provides for exempt application scenarios. It clarifies 13 exempt scenarios, mainly covering three categories:

One is that, based on product or business system design, the market has clear expectations for relevant business segments, and support is needed for the development of the business. For example, preferential share conversion, conversion of convertible bonds, redemption, repurchase, exchangeable bond conversion, redemption, repurchase, ETF subscription, subscription for additional units, redemption, grant, registration, and exercise related to equity incentives, and market-making business, etc.

Two is that shareholding changes result from objective non-trading factors, such as judicial compulsory enforcement, inheritance, donation, free transfer of state-owned shares, etc.

Three is trading activities conducted in accordance with the law as required by regulatory provisions or to address major financial risks and maintain financial stability, such as fraudulent issuance with an order for repurchase, and unauthorized reductions of holdings with an order for repurchase, etc. To prevent the use of exempt scenarios to evade regulation, the Provisions clarify that if the above-mentioned actions involve seeking illegal benefits by leveraging information advantages, they will not be exempted.

Finally, it clarifies the arrangements for institutional applicability. For the three categories where professional institutions manage them and open securities accounts separately for each product or portfolio in accordance with the product or portfolio, shareholdings shall be calculated separately by the one-account-for-all account for each product or portfolio:

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

Two is collective private asset management products managed by securities and futures fund management institutions, and private securities investment funds that meet regulatory requirements.

Three is overseas public funds that participate in domestic securities trading through qualified overseas institutional investors and the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect mechanisms, and that report, as required, the Northbound shareholding information for the relevant products. To prevent the use of this measure to evade regulation, the Provisions clarify that, for the above products or portfolios, if they cannot independently comply with the requirements for standardized operation or if there are conflicts of interest, illegal or non-compliant conduct during the trading process, the securities holdings will not be separately calculated.

Securities lending under securities lending and borrowing transactions is not a form of exemption

Article 6 of the Provisions uses the format of a “list of exemptions,” enumerating 13 situations that do not constitute short-swing trading, mainly divided into three major categories.

It is reported that, in the 2023 draft for public comments, “conducting securities lending and borrowing transactions in accordance with the Interim Measures for the Supervision of Securities Lending and Borrowing Business, and lending and returning stocks or other securities with equity characteristics” was listed as an exception, but in the 2026 new rules, that exception clause was deleted.

The Jia Yuan Law Firm stated that this change may be because, in practice, some listed company shareholders have used securities lending and borrowing business to indirectly reduce holdings, namely by lending the shares through securities lending and borrowing to achieve a “temporary transfer” of shares in disguise. Out of prudent consideration, when determining whether a transaction constitutes short-swing trading, the securities lending and borrowing transaction should also be treated as a “sale.”

The 2026 new rules clearly provide that buying resulting from an order by the CSRC to repurchase, an order to repurchase for unlawful reductions of shares, or an unlawful repurchase by a liable entity, will not trigger short-swing trading; at the same time, an exemption for legally compliant transactions needed to address major financial risks and maintain financial stability was added. The Jia Yuan Law Firm said that the above exemptions establish a closed logical loop of “unlawful reduction of holdings → order for repurchase.” In the past, when a shareholder was ordered to repurchase, they might worry that the repurchase itself would also constitute short-swing trading, but the new rules in 2026 have completely eliminated this compliance contradiction.

Regarding applicable subjects, Article 8 of the Provisions clarifies that the securities involved in the recognition of short-swing trading held by directors, supervisors, and senior management personnel, and natural person shareholders, include securities held by their spouses, parents, and children, as well as securities held by using other persons’ accounts.

The Dacheng Law Firm stated that this means that the “key few” not only must properly manage their own securities accounts, but must also strengthen the management of securities accounts of family members to avoid violations caused by mistaken operations by close relatives. Specifically, for securities held by the spouses, parents, and children of investors with certain identities, the Provisions clarify that they are unconditionally deemed to be the securities held by the investor themselves based on the relationship of identity. For securities held by other third parties that do not have a close relatives relationship, they must constitute “securities held by using other persons” in order to be aggregated for calculation. This will create considerable difficulty in evidence collection in situations where both parties have agreed in advance, posing challenges to securities administrative law enforcement.