SZSE recently revised the Implementation Rules of Shenzhen Stock Exchange for the Convertible Corporate Bond Business and formed the Business Guidelines of Shenzhen Stock Exchange for Self-discipline Regulation of Listed Companies No. 15 – Convertible Corporate Bonds (Exposure Draft) (hereinafter referred to as the Guidelines on Convertible Bonds). The move is to put in place the requirements of the Measures for the Management of Convertible Corporate Bonds (hereinafter referred to as the Management Measures), further regulate relevant services concerning convertible bonds such as listing, conversion, redemption, resale and information disclosure, and protect investors’ rights and interests. SZSE started to seek public opinions on the exposure draft on July 1.

Convertible bonds, as a hybrid securities type with the characteristics of both stocks and bonds, can better meet the diversified investment and financing needs of listed companies and investors. In recent years, with the deepening of the reform of the capital market, the trading of convertible bonds has become popular and listed companies have been actively issuing convertible bonds to raise funds or purchase assets. Convertible bonds are playing a more and more significant role in strengthening the capability of the financial sector in serving the real economy, raising the proportion of direct financing, optimizing the investment and financing structure, etc.

With information disclosure at the core as always, SZSE has, according to the requirements of the Management Measures and based on day-to-day regulatory practices, further refined the business rules on convertible bonds and formed the Guidelines on Convertible Bonds. SZSE has mainly made the following revisions. First, it has included private placement convertible bonds into the sphere of regulation and set provisions on the listing, conversion, redemption, resale, principal and interest payment, repurchase, cancelation, etc. for them. Second, it has enhanced information disclosure of convertible bonds, requiring relevant information to be disclosed when it’s five trading days before the estimated day of triggering redemption conditions, when redemption conditions are met and when the conditions for correction of conversion prices are triggered. Third, it has refined the regulations on redemption, resale, conversion, suspension of trading, etc., laying down the “cooling period” of at least three months for exercising the redemption right again in case no redemption right is exercised, and also the requirements on the interval between the redemption condition invoked day and the redemption day and between the resale condition triggering day and the first day of the declaration period. Meanwhile, it has improved relevant arrangements on the suspension of trading or transfer during the redemption period and before the end of the conversion period, as well as the arrangements on the suspension or resumption of conversion of convertible bonds when the trading of stocks is suspended or resumed. Fourth, it has specified the regulatory requirements on the short-swing trading for the subscription, transaction or transfer of convertible bonds. Fifth, it has strengthened the continuous supervision duty of intermediaries.

The deadline for seeking public opinions on the Guidelines on Convertible Bonds is 8 July 2022. Opinions and suggestions from all sectors of society are welcomed. SZSE will make further revisions and improvements based on relevant opinions and suggestions. Next, SZSE will earnestly practice the principles of “system building, non-intervention, and zero tolerance” and stick to the market- and law-based reform direction. Meanwhile, SZSE will keep refining the institutional supply on convertible bonds and improving the level of regulatory services according to the overall plan of CSRC, so as to maintain the stable operation of the market and promote the high-quality development of the convertible bond market.