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Notice on the Promulgation of the Interim Measures for the Listing and Trading of the Depositary and Depository Depositary of the Shanghai Stock Exchange and the London Stock Exchange
SSE Fa  No. 87
In order to regulate the listing, transaction, cross-border conversion and information disclosure of the depositary receipts of the Shanghai Stock Exchange (hereinafter referred to as the Stock Exchange) and the London Stock Exchange, safeguarding the market order and protecting the legitimate rights and interests of investors, according to the People’s Republic of China Securities Law, "Several Opinions on Piloting the Issuance of Stocks or Depositary Receipts in Innovative Enterprises", "Administrative Measures on the Issuance and Transaction of Depositary Receipts (Trial)" on the Exchange Depository Voucher Business of the Shanghai Stock Exchange and the London Stock Exchange The Regulations (Trial) and other laws, administrative regulations, departmental rules, regulatory documents and the relevant business rules of the Exchange, the Bank has formulated the Interim Measures for the Listing and Trading of the Depositary and Depository Depositary of the Shanghai Stock Exchange and the London Stock Exchange. (See attachment for details), is hereby released and will be implemented as of the date of publication.
It is hereby notified.
Shanghai Stock Exchange
November 2, 2017
The Shanghai Stock Exchange's answer to the issue regarding the issuance of the supporting business rules for the listing of Huluntong depository receipts
On November 2, the Shanghai Stock Exchange (hereinafter referred to as the Shanghai Stock Exchange) officially issued the relevant support for the Shanghai Stock Exchange and the London Stock Exchange (hereinafter referred to as the “London Exchange” interconnection and depository certificate business (hereinafter referred to as the Huluntong depository certificate business). Business Rules. Regarding the formulation of the rules, the relevant person in charge of the Shanghai Stock Exchange answered the reporter's question.
1. Please introduce the overall situation of the formulation of the supporting business rules for the listing business of Huluntong.
The launch of the Huluntong depository certificate business is an important measure to further expand the two-way opening of the capital market, which will help to improve the international competitiveness of the capital market and the ability to serve the real economy. It will also provide more opportunities for domestic investors to achieve global resource allocation. select. According to the unified deployment of the China Securities Regulatory Commission, the Shanghai Stock Exchange has researched and formulated the supporting business rules at the exchange level to ensure that the Huluntong depository certificate business is legally and compliant.
The supporting business rules issued by the Shanghai Stock Exchange in this episode include eight business rules including the “Interim Measures for the Listing and Trading of the Depositary and Depository Depositary Deposits between the Shanghai Stock Exchange and the London Stock Exchange” (hereinafter referred to as the “Interim Measures”). These business rules are based on the Securities Law and the Securities and Futures Commission's "Several Opinions on Piloting the Issuance of Stocks or Depositary Receipts for Innovative Enterprises" (hereinafter referred to as "Pilot Opinions") and the Depositary Receipts issued by the CSRC. Measures for the Issuance and Transaction Management (Trial) (hereinafter referred to as the “Certificate of Depositary Receipts”) and “Regulations on the Implementation of the Depositary and Depository Voucher Services of the Shanghai Stock Exchange and the London Stock Exchange (Trial)” (hereinafter referred to as “Regulations”) ")) and other high-level system norms.
The "Interim Measures" is the basic business rules for the regulation of the listing business of Huluntong, the listing, trading, continuous supervision, cross-border conversion of Shanghai China Depositary Receipts, and the listing of global depositary receipts, cross-border conversion, etc. The matter has been centralized. Based on this, in accordance with the listing pre-audit, cross-border conversion and market-making business of Shanghai Luntong Depositary Receipt, the “Guidelines for the Pre-audit Business of China Depositary Receipts Connected by Shanghai Stock Exchange and London Stock Exchange” were respectively formulated. The “Guidelines for the Cross-border Conversion of the Shanghai Stock Exchange and the London Stock Exchange”, “Guidelines for the Shanghai Stock Exchange and the London Stock Exchange Interconnected with China Depositary Receipts”.
This time, the "Shanghai Stock Exchange and the London Stock Exchange Interconnected China Depositary Receipts Transaction Risk Necessary Terms", "Shanghai Stock Exchange and the London Stock Exchange Interconnected China Depositary Receipts Announcement" Notice of Formats" Notice on the Issues Concerning the Collection of China Depositary Receipts by the Shanghai Stock Exchange and the London Stock Exchange" Notice on the Relevant Matters Concerning the Information Disclosure Period of the China Stock Exchange Business Interconnection between the Shanghai Stock Exchange and the London Stock Exchange 》4 supporting business guidelines and notices.
In the early stage, the Shanghai Stock Exchange has publicly solicited opinions on the four business rules, such as the Interim Measures, and received about 200 feedbacks and suggestions. Overall, the market participants basically recognized the business model and rules structure of the Huluntong depositary receipts, and the opinions were mainly focused on the details of business implementation, rule execution and specific operational aspects. The Shanghai Stock Exchange has carefully studied the feedback and absorbed the reasonable opinions and suggestions into the business rules such as the Interim Measures. The follow-up will also further clarify relevant operational matters through the development of supporting guidelines, operational guidelines and organizational training.
2. In the Huluntong Depository Receipts business, overseas issuers may publicly issue listed Chinese depositary receipts in China without the addition of basic stocks as the underlying securities. What is the special nature of this issuance and listing model? What are the specific institutional designs?
At the initial stage of the Huluntong depository certificate business, the overseas basic securities issuer (hereinafter referred to as the overseas issuer) did not have financing arrangements, and only publicly issued the listed Chinese depositary receipts in China with non-new stocks as the underlying securities. This public offering and listing model is different from the domestic IPO model of domestic stocks. There is no new centralized public offering and subscription, but it is necessary to establish cross-border conversion according to certain mechanisms. After the liquidity, the application for listing transactions.
Specifically, after the overseas issuer has obtained the approval of the public issuance by the China Securities Regulatory Commission, the qualified domestic securities company (hereinafter referred to as the Chinese cross-border conversion agency) will buy or otherwise legalize in the overseas market according to relevant regulations and business agreements. The method obtains the basic stock and delivers it to the depositary, and the depositary issues the corresponding depositary receipt to the Chinese cross-border conversion agency according to relevant regulations and business agreements. This cross-border conversion business before the listing is also called the “initial generation” link. After the initial deposit of China Depositary Receipts meets the minimum listing share and market value requirements stipulated in the Interim Measures, the issuer can submit a listing application.
Due to the large differences in business models, overseas issuers use non-new base stocks as the underlying securities to publicly issue listed Chinese depositary receipts in China. It is not possible to directly apply the specific provisions of the current domestic legal system on IPO public offerings. Therefore, in the issuance approval and listing review system, the following targeted arrangements have been made: First, in accordance with the provisions of the Securities Law, it is included in the public issuance of securities for supervision, and the CSRC approves public offering according to law; The pre-audit mechanism shall be reviewed by the exchange whether the overseas issuer meets the listing conditions (including the issuance conditions); the third is to simplify the relevant application documents and the review procedures in light of the actual situation of the overseas issuer not to raise funds, and the securities supervision The review process does not need to be submitted to the issuance review committee for review; the fourth is to facilitate the parties, the listing pre-audit application and the public issuance application are simultaneously accepted, and the public issuance application documents are accepted by the CSRC through the Shanghai Stock Exchange.
3. Which of the overseas issuers can publicly issue the listed China Depositary Receipts in China? What institutional arrangements have been made for information disclosure and ongoing regulation?
As the name suggests, the overseas issuer of the Shanghai China Depositary Receipt is limited to overseas issuers listed on the Stock Exchange. On specific conditions, overseas issuers must first satisfy the basic issuance conditions for the issuance of depositary receipts in the Depositary Receipts and Regulations; secondly, they need to meet the specific listing conditions for the China Depositary Receipts in the Interim Measures. In general, the listing conditions include three aspects: First, the total market capitalization size requirement, that is, the average market value of overseas issuers calculated based on the closing price of the base stock on the 120 trading days before the issuance application date is not less than RMB 20 billion; The time limit for listing is three years after the listing on the Stock Exchange and the high-level listing of the main board for one year; the third is the requirement for the size of the domestic listing, that is, the number of Chinese depositary receipts for listing is not less than 50 million and the corresponding stock market value is not Less than RMB 500 million.
In terms of information disclosure and continuous supervision, the overseas issuers of Huluntong China Depositary Receipts generally implement the same standards as the listed overseas red-chip enterprises in the pilot enterprises of innovative enterprises. The overseas issuer shall abide by the domestic law and the information disclosure requirements stipulated by the business rules of the Shanghai Stock Exchange; the announcements disclosed in the market of the Stock Exchange shall be simultaneously disclosed in the market of the Shanghai Stock Exchange; the application documents for listing and the documents for continuous disclosure shall be disclosed in Chinese, etc. Wait. At the same time, taking into account the information disclosure requirements of the main board market of the Stock Exchange, the information disclosure requirements of the Shanghai Stock Exchange market are roughly equivalent; the overseas issuer of the Shanghai Stock Exchange China Depositary Receipt is limited to the senior listed company of the Main Board of the Stock Exchange, usually with good information. Disclosure of compliance practices; Huluntong China Depositary Receipts implement an investor suitability management system, and only qualified investors with higher risk perception and affordability can participate in such factors. The Interim Measures allow overseas issuers to Under the premise of lowering the substantive standards for information disclosure, the provisions of the Shanghai Stock Exchange shall be adjusted in accordance with the relevant provisions of the company's place of registration, overseas listings, and standards generally recognized in the market practice of the Stock Exchange. Where the relevant adjustments are applied, the overseas issuer shall explain the reasons and alternatives and hire a law firm to issue legal opinions. If the Shanghai Stock Exchange believes that it should not be adjusted according to law, it will not be adjusted.
4. What are the considerations for cross-border conversion of the depository receipts of Huluntong? How to implement it?
An innovative arrangement for the Huluntong Depository Voucher Trading System is to allow cross-border conversion. The "Pilot Opinions" and the "Certificate of Depositary Receipts" have made provisions for the cross-border conversion of depositary receipts. Allowing Huluntong Depository Receipts to carry out cross-border conversions is mainly due to three considerations: First, the listing of Chinese depositary receipts with non-new stocks as the underlying securities must establish liquidity through cross-border conversion; Cross-border conversion will help the reasonable pricing of the deposit book of Huluntong; thirdly, cross-border conversion is the common practice of the depositary receipt business in overseas market, which is in line with the internationalization project positioning of the deposit and withdrawal certificate business of Huluntong.
Cross-border conversion refers to the conversion of the internal memory certificate and the overseas base stock according to the established ratio. Taking China Depositary Receipts as an example, its cross-border conversion covers the initial stage of pre-marketing and the continuous conversion after listing. From the perspective of business, cross-border conversion involves generating and redeeming both directions. The generation link corresponds to the conversion of the overseas base stock into the memory certificate, that is, the Chinese cross-border conversion institution buys in the overseas market or obtains the basic stock in other legal ways and delivers the depositary. The depositary is in accordance with the relevant regulations and the depositary agreement. It is agreed to issue the corresponding Chinese depositary receipts; the redemption link corresponds to the conversion of the local memory certificate into the overseas basic stock, that is, the depositor cancels the corresponding Chinese depositary receipt according to the relevant regulations and the depositary agreement, and delivers the corresponding basic stock to China. Cross-border conversion agency.
Cross-border transformation, as a trading balance mechanism, has two-way nature. It is judged and implemented by the relevant market entities according to factors such as changes in supply and demand, and bears risks at their own risk. The number of shares of the depositary receipts during the duration of the deposit will be subject to change based on the cross-border conversions within the maximum number of issuers allowed to be publicly issued.
5. What are the differences between the trading mechanism of Shanghai Luntong China Depositary Receipt and A-shares?
The Shanghai Depository China Depositary Receipt implements a bidding and market-making mixed trading system. In terms of bidding transactions, the trading mechanism is generally consistent with the A-shares, but some differentiation arrangements have also been made. It mainly includes the following aspects: First, the same price limit as A shares is implemented, but if the whole day is closed or exceeds 7 natural days, the proportion of the first trading day will be relaxed to 20%; secondly, For China Depositary Receipts that are publicly listed on non-new base stock-based securities, the opening and closing limits will not be released on the first day of listing, and the RMB price of the base stock converted from the recent closing price of the stock exchange market will be used as the opening price. The reference price, and the initial stage of listing does not apply to the initial regulatory requirements for new shares; third, if the overseas issuer issues a cash dividend, the Shanghai Stock Exchange does not issue a corresponding ex-dividend for the China Depositary Receipt; the fourth is that the China Depositary Receipt publishes the transaction on each trading day. Quotes and other information, but not applicable to the relevant provisions of the Shanghai Stock Exchange "Transaction Rules" on stock abnormal fluctuation indicators and trading public information. In addition, China Depositary Receipts are not included in the scope of underlying securities for margin financing and securities lending, stock pledged repo and agreed repurchase securities transactions.
6. The Shanghai Stock Exchange China Depositary Receipts Trading implements the investor suitability management system. What are the considerations for the specific conditions? In addition, what other investor protection measures are there?
The "Certificate of Depositary Receipts" and "Regulatory Provisions" stipulate that the Shanghai Stock Exchange's China Depositary Receipts Transaction implements an investor suitability management system. The Interim Measures further specifically stipulates the appropriateness requirements of investors, that is, individual investors should meet the requirements of the application authority to open the securities account of the previous 20 trading days and the assets in the fund account are not less than RMB 3 million per day, and do not exist. Severe bad credit records, no domestic laws and business rules prohibit or restrict their participation in securities transactions, and through the comprehensive assessment of member organizations; institutional investors should comply with domestic laws and the rules of the Shanghai Stock Exchange business rules. The specific qualification conditions shall be determined in accordance with the existing requirements for daily average assets recognition and comprehensive evaluation in the business of Shanghai-Hong Kong Stock Connect and stock options.
The reason for setting the above-mentioned appropriateness management requirements is as follows: First, the Shanghai China Depository Receipts involve many innovations, the business is more complicated, and the risk perception and affordability of investors are higher; Second, from the experience of investors' appropriate management of innovative businesses such as Hong Kong Stock Connect and stock options, asset size is one of the important criteria for investor's appropriate management. It is also an important reference for assessing investors' risk tolerance. Third, Excluding investors with serious bad faith records and being prohibited from participating in securities transactions by laws, regulations and business rules is conducive to creating a credible market environment and maintaining normal trading order.
On the basis of the implementation of investor suitability management, Huluntong depository certificate business implements multi-dimensional investor protection arrangements, which mainly include: First, requiring overseas basic issuers to participate in the issuance of China Depositary Receipts, and fulfilling the issuer and listing according to law. The company is obligated to assume corresponding legal responsibilities; the second is to require overseas issuers to ensure that the actual interests of domestic investors are roughly equal to those of overseas basic securities holders, and may not discriminate against domestic investors; the third is to require depositors to take effective measures to ensure The fourth is to require overseas issuers to set up securities affairs agencies in China, to hire information to disclose domestic representatives, and to protect the right of insider's right to know; the fifth is to require depository agreements to clearly stipulate disputes arising from Chinese depositary receipts. Chinese law, governed by domestic courts, etc.
7. What regulatory requirements have been made by domestic issuers to the listing of listed Huluntong Global Depositary Receipts in the market of the Stock Exchange?
The issuance of listed global depositary receipts by domestic issuers to the market of the Stock Exchange is an important part of the deposit and withdrawal business of Huluntong. In this regard, the "Regulations" have made a series of basic provisions in terms of issuance conditions, issuance price requirements, cross-border conversion and redemption period restrictions, mergers and acquisitions, and foreign investors' rights and interests.
The domestic issuer of Shanghai Luntong Global Depositary Receipt is also a listed company of the Shanghai Stock Exchange. In principle, the Shanghai Stock Exchange conducts information disclosure supervision on domestic issuers in accordance with the provisions of the Shanghai Stock Exchange Listing Rules for companies listed at the same time. . In addition, due to the cross-border conversion of Huluntong Global Depositary Receipts, the Interim Measures further regulates the listing of domestic basic stocks and the cross-border conversion of global depositary receipts.
It should be noted that in addition to the regulations made by the domestic market, domestic issuers are also required to comply with the relevant listing conditions and regulatory requirements of the Stock Exchange market. The Shanghai Stock Exchange will actively provide services and support for eligible domestic issuers to publicly issue and list global depositary receipts in the market.
For the Chinese version of the supporting business rules published in this episode, please refer to the “Business Rules of the Exchange – Huluntong Rules” section of the official website of the Shanghai Stock Exchange. For the English version, please refer to the “Laws & Regulations-Shanghai-London Stock Connect” section of the SSE English website.
A picture to understand Huluntong:
(Article source: SSE website)