Improving basic systems and ensuring risk control are the basic guarantee for the high-quality development of the bond market. To facilitate the high-quality implementation of the registration-based corporate bond issuance system reform as well as strengthen risk control throughout the whole chain, SZSE organized and held the Forum on Bond Regulation on May 13. Relevant securities companies attended the forum. With the theme of “Improving Information Disclosure Quality and Guarding against Risks”, SZSE reported the progress it made in refining basic systems and pushing for improvement in the quality and efficiency of review and duration management. In-depth discussions were conducted centering on improving information disclosure quality in the links of issuance review, continuous regulation, risk resolution, etc. Work plans were laid out to further strengthen the capability of the exchange’s bond market in serving the real economy.

Optimizing basic systems in all respects and advancing the registration-based system reform in depth

Since the implementation of the registration-based system for issuance of corporate bonds, SZSE has strengthened basic systems, optimized review procedures, and set clear review standards according to the requirements of the new Securities Law. In addition, SZSE has continuously made innovations in the product system, conscientiously put in place relevant requirements on risk control, and promoted the reform of the issuance system in an orderly manner. Those efforts are to ensure that the work relating to the registration-based system is steadily carried out and  to improve the efficiency and standard of our services to the real economy.

Relevant officials of SZSE said that this year is an important year for SZSE to further implement the registration-based system reform and optimize the basic systems of the bond market in all respects, and it will see important institutional innovations in issuance and underwriting, trading, continuous regulation, investor protection, etc. of corporate bonds. SZSE has recently issued the guidelines on focuses of review regarding issuance of corporate bonds and three reference format guides on prospectus, periodical report and interim report. SZSE has also sought public opinions on the bond trading rules and supporting business guidelines, to further develop a rules system for the bond market that is scientific, complete, transparent, efficient, clear and easy to implement. SZSE has strengthened regulation of bond issuance and market access, and standardized and refined the requirements on bond information disclosure to improve the timeliness, pertinence and effectiveness of information disclosure. In addition, SZSE has refined the bond trading rules and optimized supporting business arrangements to increase bond liquidity and stability, thus better adapting to the high-quality development needs of the SZSE bond market. Next, SZSE will organize special-topic training on a regular basis and do a good job in policy consulting and interpretation of rules, to improve market entities’ awareness of complying with information disclosure rules and standard operation level.

Refining the risk control mechanism, and fully playing the role as the “gatekeeper”

SZSE adheres to the market- and law-based direction and always upholds the principle of paying equal attention to market development and risk control. While serving the real economy, SZSE has attached great importance to risk control in the bond market. Under the guidance of China Securities Regulatory Commission (CSRC), at the beginning of the year, SZSE laid out an overall plan for the bond risk control work for the year. According to the plan, SZSE will focus on key fields, improve areas of weakness, and adopt various measures simultaneously to form a synergy for bond risk control. So far, SZSE has established the “ex ante – in process – ex post” risk control system for fixed-income products, and according to the principles of “classified regulation and targeted policies”, SZSE has built the joint bond risk control mechanism. First, in ex ante risk control, SZSE will strictly implement review policies and formulate the review standards for key fields. Second, in in-process risk control, SZSE will establish the risk classification mechanism with issuers and trustees at its core, and develop a risk matrix for risk events and a contingency plan for major risks. Third, in ex post risk resolution, SZSE will adopt targeted policies based on risk types, give play to regulation synergy, and guide some enterprises to ease debt pressure and handle bond risks using market- and law-based debt management instruments such as bond put-back cancelation, put-back and resale and bond swap. Fourth, SZSE will actively introduce professional institutions for handling risks and defaulted bonds and improve the liquidity of medium- and high-risk bonds and/or defaulted bonds on the specific bond transfer platforms to guide effective clearing of market risks.

Representatives attending the forum agreed that it’s necessary to let intermediaries give full play to their due role in deepening the implementation of the registration-based system and take solid steps to improve their practice quality, thus steadily promoting the high-quality development of the bond market. First, it’s necessary to enhance the awareness of responsibility, compliance and risk and strengthen internal management and duty performance capability building. More efforts should be put in quality control on all links of a project, and the risk management role of due diligence and trustee management in project application, duration management and risk resolution should be fully leveraged. Second, the idea of the registration-based system with information disclosure at its core should be implemented. Intermediaries’ practice quality, especially information disclosure quality, should be further improved. It’s necessary to make issuers’ information disclosure more normative, more proactive, more targeted and more effective, so as to protect investors’ legitimate rights and interests. Third, based on issuers’ disclosure of annual reports, it’s necessary to focus on key issues concerning debt repayment risk, conduct credit risk investigation and classified management centering on information disclosure, financial analysis, use of raised funds and corporate governance in a timely manner, and complete the reporting of the credit risk management report for the first half of the year, the disclosure of the annual report on trustee management affairs and other relevant work on schedule.

Making plans early, implementing targeted policies, and promoting the high-quality development of the bond market on all fronts

SZSE will continue to ground our efforts in the new development stage, apply the new development philosophy, and serve the new pattern of development. We will conscientiously practice the principles of “system building, non-intervention, and zero tolerance”, and follow the requirements of standing in awe of the market, rule of law, professionalism and risks and pooling the efforts of all sides to develop the capital market. While adhering to the working philosophy of being open-minded, transparent, honest and impartial, we will act on the general principle of pursuing progress while ensuring stability. We will strengthen the system foundation, optimize the market structure, improve the quality of bond issuers, and play our role as the market hub, thus enhancing the foundation for the high-quality development of the exchange’s bond market.

First, to optimize supply of rules and regulations. Following the overall plan of the CSRC, we will continue to advance optimization and transition work of self-disciplinary rules, to help improve the quality and efficiency of review, duration management and risk resolution through institutional building.

Second, to fully perform front-line regulation duties. Using the ex post annual report review as an opportunity and basing on problems and risks, we will take solid measures to improve the foresight and pertinence of regulation. Regarding the risk clues found in annual report review, we will take proactive actions and leverage the synergy in regulation to forestall and defuse risks.

Third, to improve the work system covering the whole chain of bond risk control. We will guard the access well and urge relevant entities to fulfill their responsibilities. We will strengthen duration risk monitoring and screening, intensify investigation and punishment of violations, and crack down on illegal acts such as financial fraud and malicious debt evasion, to maintain market confidence.

Fourth, to refine the market trading mechanism. Following the objective law of the bond market, we will regulate bond trading behaviors and diversify bond trading modes. We will promote the interconnection of infrastructure between the exchange and the interbank market, expand the scope of professional institutional investors, and energize market entities, to promote the high-quality development of the bond market.

Fifth, to steadily advance innovation in bond products. We will enrich product types, optimize the market structure, and fully support the steady implementation of the pilot project of publicly offered infrastructure REITs. We will make better use of existing assets, improve the operation efficiency of infrastructure, and enhance the capability of the exchange’s bond market in serving the real economy.