SZSE released the Notice on Adjustment of Transaction Methods for Listed Bonds (hereinafter as “the Notice”) on March 29th. SZSE spokesman took questions of concern in the market from reporters.

1. Would you introduce the background against which the Notice was published?

Last year, SZSE issued the SZSE Corporate Bond Listing Rules (revised in 2018), specifying that SZSE may adjust the trading mechanism for a listed bond, depending on market conditions and credit status of the bond. The Notice formulated and issued this time further improves the bond risk management system, promotes the stable and sound development of the SZSE bond market, and protects the legitimate rights and interest of investors. For bonds whose credit rating is lower than AA, SZSE will adjust the trading mechanism while they are listed, allowing Negotiated Block Trading Mechanism only. Adjustment of the trading mechanism of listed bonds corresponds to the risk characteristics of bonds. It shall benefit the market mechanism, protect market liquidity and prevent and resolve bond credit risks

2. What are the types of bonds the Notice apply to?

The Notice applies to corporate bonds (including exchangeable corporate bonds) and enterprise bonds that are listed in SZSE market, and that are traded both via centralized bidding and block trading. The Notice is not applicable to convertible corporate bonds issued by listed companies.

3. What will be the differences in transaction methods available to investors, after the adjustment of transaction mechanism is triggered?

When an adjustment is triggered, the trading method will be changed from the dual channels of centralized bidding trades and block trades to the single channel of block trades by agreement. Investors may choose declaration by intention, by given prices or by closed deals. The declared bond price range will be 30% higher or lower than the weighted average price of all the closed deal volumes of the previous trading day and the amount or volume of a single trade shall satisfy the minimum volume threshold of block trades set forth by SZSE. Moreover, in consideration of the circumstance that under the original centralized bidding trading, the amount and volume of bonds held by investors may be shorter than the said minimum volume threshold, the Notice introduces a one-off selling mechanism that allows such investors to sell the bonds held all at once.

Furthermore, since the bond credit rating has been adjusted to lower than AA (ex AA), according to the Measures on Investor Suitability Management in the Bond Market of Shenzhen Stock Exchange and other relevant rules, only qualified institutional investors may buy such bonds after the trading mechanism adjustment and other types of investors holding such bonds may choose to sell or continue to hold the bonds.

4. After the Notice is launched, what are the specific arrangements for implementing the bond trading method adjustment?

The Notice was released on March 29, 2019 and will be implemented from this April 4th. The first batch of bonds having their trading mechanism adjusted will be under trading suspension since this April 8th and will be traded under the method of block trades by agreement since their day of trading resumption. Bond issuers, entrusted managers or other institutions having equal duties shall perform information disclosure and other work according to the Notice. All members and relevant units shall take measures such as technical system front end control and strictly implement the rules on declaration method, declaration quantity and declaration price stated in the Notice to enhance the management over trading declaration behaviors like independent operation, brokerage and asset management and do well in rule interpretation and education for investors.