Seriously implement the Securities Law and comprehensively promote the work of Shenzhen Stock Exchange

Zhang Yujun, General Manager of Shenzhen Stock Exchange, Shanghai Securities Journal

The new securities law clarifies the position of the stock exchange as a self regulatory organization, and makes a breakthrough in the provisions of the stock exchange from seven aspects, thus opening the legal space for the next step of innovation, development and expansion of the stock exchange. Shenzhen Stock Exchange will firmly seize the opportunity of the amendment of the two laws, do a solid job in market organization, innovation and supervision in accordance with the unified deployment of the CSRC, and actively promote the standardized, healthy and stable development of the securities market.

1、 Seven Breakthroughs in the New Securities Law on Stock Exchanges

1. Clarify the status of self regulatory organizations of stock exchanges

Self regulation is an indispensable part of the securities market supervision system. The new securities law draws on the experience of self-regulation in international mature markets. Article 102 stipulates that "the stock exchange is a legal person that provides places and facilities for centralized securities trading, organizes and supervises securities trading, and implements self-regulation management." It defines the legal status of the stock exchange as a self-regulation organization for the first time in law, which is conducive to the exchange giving better play to its self-regulation advantages, It has also strengthened the authority of self-regulation of stock exchanges.

2. Expand the scope of supervision of stock exchanges

The new securities law has expanded the scope of the supervision function of the stock exchange. First, the scope of the stock exchange's supervision of securities trading has been expanded from members to investors. The second paragraph of Article 115 stipulates that "the stock exchange may, as required, restrict the trading of securities accounts in which significant abnormal trading occurs, and report to the securities regulatory authority under the State Council for the record". The second is to expand the scope of information disclosure supervision from listed companies to various information disclosure obligors. The third paragraph of Article 115 stipulates that "the stock exchange shall supervise the disclosure of information by listed companies and relevant information disclosure obligors, and urge them to disclose information in a timely and accurate manner according to law", thus also including "relevant information disclosure obligors" such as controlling shareholders and actual controllers of listed companies into the scope of information disclosure supervision of the exchange, It is more conducive to ensuring investors' right to fair access to information.

3. Create conditions for the diversification of the organizational forms of exchanges

At present, two major stock exchanges in China have implemented the membership system. Under the background of economic globalization, they are facing increasing competitive pressure from foreign corporate stock exchanges. The new securities law deletes the "non-profit purpose" from the original provision that "the stock exchange is a non-profit legal person that provides a centralized auction trading place for securities", which reserves legal space for the stock exchange to adopt other organizational forms other than membership in the future, and also removes legal obstacles for the possible corporate restructuring and listing of the stock exchange in the future.

4. Authorize the Stock Exchange to review the listing of securities and other relevant powers

At present, China implements an integrated system of issuance and listing review. The issuance review of the CSRC has completely replaced the listing review, becoming the only market access threshold. The basic experience of the review system of stock issuance and listing in major overseas markets is that, as far as the review system is concerned, the issuance review is mostly carried out by the competent government authorities, and the listing review is the "natural" power of the exchange. In 2002, the CSRC authorized the Exchange to make decisions on suspension, resumption and termination of listing in accordance with the law, and began to move closer to international practices in the listing review system. This revision of the Securities Law, drawing on the experience of mature overseas markets, separates the approval of securities issuance from the approval of listing, and grants the right to review the listing of stocks and corporate bonds to the stock exchanges, is of great significance for giving full play to the self-discipline management function of the stock exchanges and promoting the construction of a multi-level capital market system.

5. Adjust the scope of subjects participating in securities trading

According to the original securities law, only securities companies with the membership of the stock exchange can enter the stock exchange to participate in trading, which has a large restriction on market subjects. With the development and expansion of the securities market, the market participants gradually show a trend of diversification. For this reason, the new securities law will adjust the main body entering the stock exchange to participate in centralized trading to "members of the stock exchange". First, the new securities law has reserved legal space for financial mixed operation, which means that institutions that enter the stock exchange in the future and directly participate in centralized securities trading may no longer be limited to securities companies; Second, some future trading varieties of the stock exchange may expand the trading participants, such as bonds and securities derivatives. Institutions other than securities companies can directly participate in centralized securities trading after applying for membership and obtaining special seats.

6. Expand the securities trading methods and varieties of stock exchanges

The original securities law has strict restrictions on the way and variety of securities trading, which has become one of the bottlenecks in the development of the current securities market. The new securities law has relaxed the restrictions on trading methods and varieties from three aspects. First, the securities trading mode of the exchange has been changed from "centralized bidding trading mode" to "centralized trading mode or other modes approved by the securities regulatory authority under the State Council", leaving legal space for the exchange to promote non bidding trading modes such as negotiated transfer; Second, the provisions of the original securities law prohibiting revolving trading were deleted, which removed legal obstacles for the introduction of revolving trading system; Third, it is stipulated that "securities trading shall be carried out in spot and other ways specified by the State Council", which also provides necessary innovation space for financial derivatives such as stock index futures.

7. Clarify the ownership of real-time market information of securities trading

From the practice of mature overseas securities markets, most national laws recognize that stock exchanges have the right to manage and benefit from trading information. China's Shenzhen Shanghai Stock Exchange also stipulates in the Trading Rules that the exchange has the ownership of securities trading information. Article 113 of the New Securities Law stipulates that "without the permission of the stock exchange, no unit or individual shall publish the real-time information of securities trading", which legally establishes the exclusive right of the stock exchange to the information of the real-time information of securities trading.

2、 Conscientiously implement the Securities Law and comprehensively promote the work of Shenzhen Stock Exchange

1. Improve the governance structure of the Exchange

(1) Actively play the role of members in the governance of the Exchange. In accordance with the requirements of the new securities law, we should improve the membership meeting system, actively play the role of members in the governance of the exchange, enhance the awareness of members' participation in the development of the exchange and related affairs, and work together to promote the development of the stock exchange.

(2) Improve the system construction of the Council and strengthen its functions. The Board of Directors is the decision-making body of the stock exchange and plays a core role in the organizational system of the exchange. In accordance with relevant regulations, we should improve the rules of procedure, organizational structure and working procedures of the Council as soon as possible, and strengthen the functions of the Council.

(3) Explore the establishment of a special committee of the exchange. It is the common practice of overseas exchanges to set up special committees, which is conducive to widely absorbing professional advice from all aspects and improving the efficiency and scientificity of the decisions of the exchanges. In the next step, according to the requirements of the new securities law, from the perspective of strengthening internal supervision and improving the fairness of self-discipline supervision, we should carry out the scheme design of special committees and explore the establishment of several special committees that meet the development needs of the market and the exchange.

(4) Improve the internal governance of the Exchange. The new securities law confirms the self-regulation status of the exchange and gives the exchange the right to review its listing. The original articles of association should be comprehensively revised in accordance with the new securities law on the nature and functions of the exchange, and the internal organizational structure should be comprehensively reviewed and reviewed to build an internal governance structure that is suitable for the exchange to exercise its functions of organizing and supervising the market.

(5) Strengthen team building. In order to better perform a series of self regulatory responsibilities entrusted by the new securities law, we should focus on strengthening our own capacity building, practicing hard, improving the quality of employees, and building a team of employees with excellent professional ability.

2. Actively promote the reform of non tradable shares

The split share structure reform is a reform to improve the basic market system and operating mechanism. Its significance lies not only in solving historical problems, but also in creating conditions for other reforms and institutional innovations in the capital market. Eliminating the circulation system differences between non tradable shares and tradable shares through the split share structure reform is conducive to the formation of a common interest base for the shareholders of tradable shares and non tradable shares, and plays an important role in improving the quality of listed companies.

Since the start of the pilot work of non tradable shares reform, Shenzhen Stock Exchange has actively promoted the non tradable shares reform under the unified deployment and guidance of the CSRC, and has taken the lead in starting and completing the non tradable shares reform including B shares (Vanke A), H shares (Angang Xinzha), and delisted companies (ST Geely Paper). By the end of 2005, 50 companies on the SME board had completed share reform, and 137 of the 487 companies on the main board (excluding pure B-share companies) had initiated share reform procedures.

The revision of the "two laws" has laid a more solid legal foundation for the reform of non tradable shares and provided a new path. For example, the new Company Law deleted the provision that "when a joint stock limited company converts its reserve fund into capital through a resolution of the general meeting of shareholders, it will distribute new shares or increase the par value of each share according to the proportion of the original shares of shareholders", thus clearing the legal obstacles for listed companies to adopt the plan of directional conversion of reserve fund to solve the problem of share splitting. Shenzhen Stock Exchange will firmly seize the opportunity of the implementation of the "two laws", continue to actively and steadily promote the share trading reform of listed companies, and strive to achieve more than half of the market value of share trading companies by the end of February next year, and basically complete the goal of share trading reform by the end of next year.

3. Vigorously develop the SME board and actively promote the construction of multi-level market system

The new securities law has laid a legal foundation for the construction of a multi-level capital market system. Shenzhen Stock Exchange will continue to vigorously develop the SME board and actively promote the construction of a multi-level GEM market system with the SME board as the core.

(1) Accelerate the construction of SME board around the eight word policy of "supervision, innovation, cultivation and service".

Taking the opportunity of the full completion of the split share structure reform of the SME board, starting from the needs of the development of SMEs, in combination with the amendments to the Company Law and the Securities Law, we should appropriately relax the conditions for the issuance and listing of SMEs, actively promote the pilot work of separating the old from the new, and strive to reform the existing refinancing system, Simplify refinancing procedures and establish green financing channels.

On the basis of continuing to strengthen the cultivation of listing, we will deepen the research and analysis of SMEs to be listed, vigorously promote the establishment of a social service system for SMEs, and provide better services for SMEs to enter the capital market.

(2) Explore the supervision mode of SMEs in the post equity division era, and improve the supervision level and effect of the SME board.

Study the new situation and new characteristics of the merger and reorganization of the SME board, stock circulation, information disclosure and other aspects in the post equity division era, and explore the regulatory model that adapts to the characteristics of SMEs in the full circulation era. We launched the Guidelines on the Protection of the Rights and Interests of Public Investors in the SME Board, and continued to implement the Guidelines on Integrity Construction, the Guidelines on the Conduct of Directors of Listed Companies on the SME Board, and the Guidelines on Recommendation Work; Continue to improve classified supervision, and focus on monitoring companies with large potential risks; Coordinate the local securities regulatory bureau's on-site inspection of listed companies on the SME board, improve the pertinence and effectiveness of the inspection, and promote the healthy development of the SME board.

(3) Actively explore and further improve the vitality of the main board market

Support large enterprises with outstanding performance to achieve overall listing through directional issuance of shares by the listed companies they hold; We will support listed companies to adopt diversified payment methods such as shares to carry out mergers and acquisitions through mergers and acquisitions and share exchange acquisitions, so as to promote listed companies to become better and stronger.

Establish the repurchase and resale system of listed companies, and allow listed companies to repurchase shares and resell them to senior executives for employee incentive according to the amendments of the two laws. Promote the equity incentive reform of listed companies, explore and promote the pilot projects of stock options, virtual stock plans and employee stock ownership plans of listed companies.

(4) Choose the opportunity to start the GEM and build a multi-level capital market system

We will conscientiously implement the Securities Law, fully promote the construction of China's Growth Enterprise Market, and launch the Growth Enterprise Market at the right time. The GEM aims to provide a direct financing platform for small and medium-sized enterprises with prominent main businesses, high technology content and good growth and technology start-ups with independent innovation ability. It will adopt more relaxed and diversified listing standards, focusing on serving technology start-ups with small equity scale, small financing amount and certain independent innovation ability.

(5) Perfect the construction of agency share transfer system and build a multi-level market system of Shenzhen Stock Exchange

Rationalize the organizational structure and division of responsibilities of the share transfer system, centralize supervision, enrich functions, and eventually develop into a national OTC market. Recently, Shenzhen Stock Exchange has cooperated with Zhongguancun Science Park to allow high-quality technology-based SMEs with independent innovation ability to enter the stock agency transfer system, providing a fast and convenient equity transfer channel for technology-based enterprises.

4. Accelerate institutional innovation and product innovation

(1) Accelerate institutional innovation, take the innovation of issuance and listing system and trading system as the foundation, form key breakthroughs in market access and exit, trading mode, market maker system, etc., and further improve the vitality and efficiency of the market.

First, according to the provisions of the new securities law on the separation of issuance and listing review, expand and adjust the functions and powers of the current listing committee of the Exchange, study and formulate the review procedures for IPO listing applications, and establish a sound listing delisting system.

The second is to study and implement a series of innovative trading systems, such as T+0 revolving trading system, margin trading system, and the introduction of diversified entrusted declaration mechanism, in combination with the current market situation of equity products and on the basis of improving the regulatory mechanism and risk control measures, in order to activate the market and meet the different needs of investors.

Third, according to the development of the fixed income product market and the demand for bond market connectivity, provide innovative systems such as bilateral quotation entrustment, inquiry request mechanism, automatic matching mechanism, and establish a full market maker trading model for fixed income products.

Fourth, reform the suspension system, reduce routine suspension, increase the proportion of warning suspension, establish an intraday emergency suspension system, improve the compulsory resumption system, and establish a suspension system for financial derivatives.

The fifth is to cooperate with the launch of derivatives and market development of the Exchange, on the basis of the existing competitive trading system, according to the transaction and risk control needs of investors, provide price difference entrustment, introduce the "circuit breaker" mechanism, enrich real-time trading information, etc., and provide financial derivatives with institutional arrangements consistent with their characteristics.

Sixth, in accordance with the provisions of the new securities law, we should formulate the management measures and licensing agreements for real-time market information that are appropriate to the national conditions, and establish a system for the use of securities information products that meets the needs of the market, is conducive to the healthy development of the market, and is also conducive to protecting the interests of investors.

(2) Accelerate product innovation, and focus on increasing research on innovative products in accordance with the innovative concept of "pragmatism, characteristics, multi win, strategy and safety".

First, focus on promoting the development of financial derivatives such as stock index futures and options, study the special trading methods of financial derivatives, actively draft relevant rules, and start the pilot work of stock index futures as early as possible.

Second, focus on the development of trading open-ended funds (LOF) products and market organization, so that LOF will become an important driving force for the development of fund markets and exchanges, and actively promote the launch and development of exchange traded funds (ETFs).

Third, we will continue to promote the pilot work of warrant products, develop various warrants, including non tradable share reform warrants, financing warrants, index covered warrants, and study the feasibility of individual stock covered warrants, SME board index warrants, and a basket of stock warrants.

Fourth, actively promote the development of asset securitization products, establish research and cooperation relationships with trust companies, securities companies, banks and other financial institutions, and expand the transfer scale of asset securitization varieties.

Fifth, establish and improve the index system with characteristics, depth and wide coverage, research and develop cross market industry indexes, further enrich the index system, and launch index trading varieties at the right time.

5. Strengthen front-line supervision of exchanges

(1) With information disclosure as the core, strengthen the front-line supervision of listed companies and relevant information disclosure obligors.

First, we should strictly supervise and strengthen the supervision of information disclosure of listed companies according to law, promote listed companies to establish and improve the internal control system of information disclosure, and improve the transparency of information disclosure. Enforce the compulsory suspension system for listed companies that do not disclose information in accordance with the provisions, increase the punishment for violations, and urge listed companies to earnestly perform their information disclosure obligations.

The second is to strengthen the guidance on the standardized operation of listed companies, launch guidance documents such as the Guidelines on Internal Control of Listed Companies and the Guidelines on Social Responsibility of Listed Companies, guide listed companies to establish a sound internal control system and disclose the implementation of the internal control system in a timely manner, strictly regulate the behavior of listed companies, and promote the formation of shareholders' meetings, board of directors A corporate governance structure with clear rights and responsibilities between the board of supervisors and the senior management, each taking its own responsibility, effective checks and balances, scientific decision-making and coordinated operation.

Third, strengthen the construction of the integrity system, launch the Integrity Re education System for Executives of Listed Companies, conduct integrity education activities through director training, qualification training for board secretaries, special training, symposiums and experience exchange meetings, further improve and perfect the integrity information database of listed companies, directors, supervisors and executives, and strengthen listed companies and their directors Integrity awareness of independent directors and senior executives.

Fourth, according to the authorization of the new securities law, strengthen the supervision of major shareholders and actual controllers of listed companies. We should strictly regulate related party transactions and curb illegal guarantees; Controlling shareholders and actual controllers are prohibited from misappropriating the funds of listed companies. For listed companies with violations such as capital occupation, urge the listed companies to disclose relevant solutions and progress in a timely manner, and cooperate closely with the securities regulatory authority to improve the work intensity and actual effect of debt clearing and security release.

(2) Strengthen the self-discipline supervision of members with the transaction code as the core

First, strengthen the self-discipline supervision of the members of securities companies, require securities companies to establish and improve their internal control systems according to law, take effective isolation measures, and prevent conflicts of interest between companies and customers, and between different customers. The securities brokerage business, proprietary business and securities asset management business of securities companies are required to be handled separately and shall not be mixed. The inspection shall be carried out irregularly, and those who violate the regulations shall be punished in strict accordance with the membership rules.

Second, on the basis of financial analysis and information disclosure review, combined with abnormal trading conditions, classified supervision measures were taken according to different risk categories of members, and risk warnings were timely given to members with high risks and necessary supervision measures were taken.

The third is to strengthen the reporting and data verification of members' proprietary and asset management accounts. Members are required to continue dynamic reporting, regularly verify the data differences between the CSRC, the Securities Industry Association and the clearing company, regularly verify the data differences between the members' statements and the data monitored by the Exchange, and further verify and handle the differences.

(3) Build a multi-level transaction supervision mechanism with immediate stop as the core.

First, improve the monitoring mechanism. Under the unified regulatory framework and concept, build a multi-level market monitoring mechanism with clear division of responsibilities, relatively independent operation, and smooth coordination and cooperation according to the different characteristics of multi-level market transactions such as the main board, the SME board, and the stock agency transfer system.

The second is to further strengthen the real-time monitoring of securities trading. According to the experience of real-time monitoring, we will study and formulate specific regulations to limit securities trading accounts, strictly enforce the law, and improve the efficiency of immediate suppression in real-time monitoring.

The third is to improve the violation investigation mechanism, build an efficient investigation and analysis work platform, constantly strengthen the analysis and grasp of market rules, transaction characteristics and violation modes, research and explore more targeted investigation means and ways, promote exchanges and interactions with regulatory authorities, and optimize the mode of assistance in investigation.

Fourth, deepen joint supervision, focus on strengthening the investigation, analysis and prevention of suspected violations, build a joint supervision mechanism inside and outside the institute with "clear responsibilities, convenient communication and quick response", act synchronously, improve the efficiency of quick response and enhance the effect of joint supervision.

6. Consolidate the technical foundation to meet the requirements of innovation and safe operation

(1) Establish a fifth generation trading system that has more functions, higher efficiency and higher security, can support multi-level, multi variety and cross market transactions, can provide both spot trading of securities and trading of financial derivatives such as futures and options, and can not only meet the requirements of the new securities law, but also meet the market demand in the next five to ten years.

First, according to the special trading mechanism of financial derivatives, improve the existing bidding trading system, and develop trading methods suitable for financial derivatives; Second, further improve the block trading system, and fully expand the functions of the block trading system based on new block trading business needs; Third, build an agreement transfer platform to provide an optional transfer platform for the future agreement transfer of tradable shares; Fourth, we should study the monitoring system for the characteristics of financial derivatives transactions in advance, and make technical preparations for the monitoring of derivatives transactions in advance; Fifth, promote the upgrading of trading hosts and plan the fifth generation trading system.

(2) Improve the operation mechanism and functions of the trading system, and effectively ensure the safe and efficient operation of the trading system.

First, further improve the system operation management mechanism, and achieve comprehensive optimization and control of status monitoring, job scheduling, data backup and recovery, authority management and other links by formulating technical specifications for operation management; The second is to improve the technical platform and means to support the centralized operation and management of the technical system, and build a technical system security management system; Third, improve operation efficiency and strengthen operation safety; Fourth, establish an independent test system to provide high-quality test services for market participants and test platforms for various innovations; Fifth, improve the functions of real-time disaster backup system.

3、 Several tasks to be promoted by Shenzhen Stock Exchange

After the promulgation of the new Securities Law and the Company Law, in accordance with the unified deployment of the CSRC, the Shenzhen Stock Exchange carried out a series of activities such as online legal publicity, holding a knowledge contest on "Two Laws and One Hundred Questions", jointly holding training on "Two Laws" for directors and senior managers of listed companies with the Shanghai Stock Exchange, and writing promotional articles on "Two Laws". In order to fully implement the relevant amendments of the new securities law, SZSE will focus on the following work:

1. Continue to carry out in-depth publicity and training activities on the two laws

After completing the training of the two laws for the listed companies in the responsible area, we will continue to carry out and deepen the publicity and interpretation of the "two laws" in future training activities such as the training of directors, secretaries and chief financial officers of listed companies and the training of the restructuring and listing of the proposed listed companies.

2. Quickly complete the revision of the supporting rules of the Exchange

On the basis of systematic planning and comprehensive sorting of the existing business rule system, and on the basis of the amendments to the listing and trading systems made by the two laws, new Listing Rules and Trading Rules should be issued as soon as possible, and relevant supporting rules or implementation rules should be formulated and improved, so as to repeal rules that are outdated or conflict with the two laws, and form a listing, trading A scientific and reasonable business rule system of the exchange with the three rules of members as the core.

3. Carefully study the new situations and problems arising in the implementation of the new securities law

On the basis of in-depth understanding of the revised contents of the new securities law on securities issuance, listing, trading, investor protection, market supervision, etc, Form a long-term legal implementation mechanism conducive to the standardized development of the market and the protection of investors.

4. Actively play the role of exchanges in market innovation

Make full use of the legal space reserved by the new securities law for the development of the exchange, give play to the advantages of the exchange in talent, information and resources, develop new products to meet the needs of various investors, establish a new mechanism that will help expand the breadth and depth of the market, and actively guide and promote the system innovation and product innovation of the securities market.