Video | China's CSRC new short-term trading regulations take effect today

Ask AI: What regulatory considerations form the basis for setting the exemption circumstances under the new rules?

Today (April 7), the China Securities Regulatory Commission has implemented the “Several Provisions on Short-Term Trading Regulation.” The new rules further clarify the regulatory arrangements for short-term trading by major shareholders holding more than 5% and by directors, supervisors, and senior management personnel (i.e., directors, supervisors, and senior executives). The core purpose is to prevent insiders from using information advantages to profit from short-term trading and to uphold market fairness.

The main contents of the “Provisions” include:

• First, it clearly defines the scope of applicable subjects and types of securities. Where the parties have the identities of major shareholders or directors/supervisors/senior executives at both the time of purchase and sale, they must comply with the short-term trading system. The Provisions also state that “other securities with equity characteristics” include depository receipts, convertible bonds, convertible corporate bonds, etc., and further specify and clarify the regulatory requirements.
• Second, it clarifies the standards for identifying and calculating holding periods and trading times. The Provisions define the trading time as the securities transfer registration date. The major shareholder’s shareholding ratio is calculated by combining shares already issued by the same listed or publicly traded company in domestic and overseas markets. The number of securities held by overseas investors through different channels is calculated on a combined basis, and the rules are aligned with relevant provisions.
• Third, it clarifies exempt circumstances. Authorized by the Securities Law of the People’s Republic of China and in light of regulatory practice, the Provisions define 13 types of exemption circumstances, including conversion of preferred stock, ETF subscription and redemption, related grant and registration and exercise under equity incentives, compulsory judicial enforcement, market-making transactions, and repurchase orders for fraudulently issued securities, among others. These are intended to support market development and regulatory needs. At the same time, it also provides that exemption will not be granted in cases where related circumstances involve seeking illegal benefits by taking advantage of information advantages, etc.
• Fourth, regarding circumstances in which securities are managed by professional institutions and separate securities accounts are opened by product or portfolio, holding shares are calculated separately for each product or portfolio using the one-account-for-each policy. This includes domestic and foreign publicly offered funds, the National Social Security Fund, the basic pension insurance fund, annuity funds, insurance funds, collective private asset management products managed by securities and futures fund management institutions, and private securities investment funds that meet regulatory requirements, among others. This is intended to facilitate trading, promote opening up to the outside world, and bring medium- and long-term capital into the market. At the same time, it clarifies that if the above products or portfolios cannot achieve independent and compliant operation, or if there are conflicts of interest, illegal or regulatory-violating conduct, etc., they will not be separately calculated.