To improve the bond pledged repo transaction mechanism and strengthen the service capability of the bond infrastructure of the Shenzhen stock market, SZSE has optimized the bond pledged repo business and revised the original interim measures. On 2 March 2021, SZSE officially released the Measures of Shenzhen Stock Exchange for Bond Pledged Repo Business (hereinafter referred to as the Business Measures). Considering that market institutions will need time for preparatory work such as networking testing and account information reporting, SZSE has provided sufficient preparation time, setting the effective date of the Business Measures on 17 May 2021.

Since its launch in 2015, the bond repo business of the Shenzhen stock market has been stable and orderly. As an effective supplement to bond pledged repurchase, the bond repo business has provided liquidity support to most bonds with a rating below AAA. On that basis, to further optimize repo business arrangements and better meet the diversified needs of the market, SZSE has, together with China Securities Depository and Clearing Corporation Limited (CSDC), modified and refined the repo transaction settlement mechanism of the Shenzhen stock market based on the implementation and market feedback and requirements of the business.

The optimization has mainly involved two respects. First, refining the display of the identity information of the transaction parties to improve transaction security. Before the optimization, when declaring a transaction, the transaction parties could see only the counterparty’s unit code and couldn’t know its identity directly. After the optimization, for the repo, bond transaction account information that transaction parties’ market institutions such as dealers, subjects of transaction and traders are required to report in advance has been added as an element of declaration, so that investors can know clearly the counterparty’s identity before concluding a transaction. This has significantly improved transaction convenience and better met institutions’ transaction risk management needs. Second, improving transaction execution convenience and fund utilization efficiency to increase investors’ participation and sense of gain. The repo business has further adapted to prior market needs, adding the function to change pledged bonds, transaction counterparty and amount. In the meantime, it has adopted the “initiated by one party and confirmed by the other party” transaction declaration mode that investors are more accustomed to. Moreover, funds that are successfully settled in the daytime can be used on that day, further improving settlement efficiency.

To support the repo business after optimization in using bond transaction account information as an element of declaration, members and other transaction participants are required to complete reporting of repo related account information in advance. Regarding agreements in transit that are not finalized yet when the repo optimization function goes online, the account information they use also needs to be reported in advance, so the subsequent transaction declaration can be smoothly conducted. To ensure steady implementation of the optimization function, SZSE has launched the bond transaction account information reporting work earlier, and has provided effective guidance to market entities by formulating a business guide, holding training sessions and providing one-to-one tutoring. The reporting work is currently being carried out in an orderly manner.