Shanghai Stock Exchange on promoting securities lending

Since the businesses of margin trading and securities lending was launched 5 years ago, margin trading has witnessed fast booms while securities lending lags. In order to boost the latter, the notice is hereby issued as to relevant matters:

First, professional institutional investors shall be encouraged to engage in securities lending to expand securities sources. The products established by professional institutional investors, including publicly offered funds and asset management plans of securities companies, can be involved in securities lending as of the date of their establishment. Such investors shall be supported to engage in securities lending and securities lending of refinancing to propel supply and demand of securities sources in the market, on the basis of making risks controllable and protecting holders’ rights and interests.

Second, market-oriented agreed application methods for securities lending of refinancing shall be introduced to assist securities companies in developing securities lending according to clients’ needs. Securities lenders and borrowers shall be permitted to negotiate for determining such items as the rate and time limit for securities lending of refinancing, in a bid to raise the trading efficiency and meet the market demand for securities lending.

Third, the trading mechanism of selling through securities lending shall be optimized to enhance trading efficiency. The order price at which exchange traded fund, or ETF, is sold by investors through securities lending shall be kept within the range of valid bidding price stipulated by the exchange, and allowed to be lower than the latest trading price. The money from selling through securities lending can be used for purchasing or subscribing for cash management products of securities companies, money market funds and other high-liquidity securities recognized by stock exchanges.

Fourth, the market regulating role of securities lending shall be fully exerted, with the range of underlying securities of securities lending properly expanded. According to actual market development, stocks fit for short selling through securities lending shall be included in the range of underlying securities of securities lending and those of securities lending of refinancing, the number of which shall be increased to 1,100 lately, thereby fully exerting the market regulating role of short selling mechanism of securities lending.

Fifth, risk control of securities lending shall be strengthened to prevent relevant business risks.

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