To further regulate business activities such as development of publicly offered index funds on SZSE, promote sustainable, healthy development of index funds and protect investors’ legitimate rights and interests, SZSE recently drafted the Guidelines of Shenzhen Stock Exchange on Development of Index Funds (Exposure Draft) (the “Development Guidelines”) according to the Guidelines on Operation of Publicly Offered Securities Investment Funds No. 3 – Guidelines on Index Funds (Exposure Draft) issued by China Securities Regulatory Commission (CSRC), to seek public opinions till August 14, 2020.

In recent years, SZSE has followed the unified plan of CSRC, adhered to the general principle of pursuing progress while ensuring stability and helped the SZSE fund market achieve positive achievements in diversifying product types, improving policies and mechanisms, deepening the market reform and serving the real economy. Listed index funds such as SZSE ETF have seen rapid development and further diversification, and have become various investors’ important instruments for asset allocation. By the end of June 2020, SZSE had a total of 247 listed index funds, with a total asset size of CNY 191.7 billion. In drafting the Development Guidelines, SZSE summed up prior experience in regulation and service provision, further improved the regulatory rules for index funds and refined institutional supply according to the requirements of higher-level laws, so as to give better play to the attribute of index funds as an instrument for asset allocation.

The Development Guidelines has further specified the regulatory requirements on listed index funds such as ETF. First, clarifying the responsibilities of index fund managers. When applying for development of an index fund, the fund manager shall make proper preparations in staffing, business policy and technical system. Second, specifying quality indicators of underlying indexes. The Development Guidelines has laid down specific requirements on the indicators of underlying indexes of index funds such as number of component bonds, weight distribution, index operation time and liquidity. According to the principle of “separating the old from the new”, the index funds that have been approved by CSRC or registered before the implementation of the Development Guidelines will not be restricted by the foregoing indicators. Third, standardizing the fund development procedures. When applying to SZSE for developing an index fund, the fund manager is required to submit the index compilation plan, the statement on compliance with specific indicators, commitments and other relevant materials, and SZSE will issue a no-action letter to applications that meet requirements. Fourth, clarifying position opening requirements. Positions of index funds shall be opened before listing to ensure that the investment portfolio ratio complies with relevant laws and regulations, ministerial provisions and normative documents as well as agreements set out in relevant legal documents such as fund contracts and reflects the basic characteristics of tracking indexes of index funds.

Relevant official of SZSE said that SZSE would further revise and improve the Development Guidelines based on market feedback, and release and implement it after performing relevant procedures. SZSE will continue to strengthen oversight of the operation process and trading risk of fund products, diversify and improve product types, and facilitate improvement in the proportion of equity funds. It will also actively guide medium- and long-term funds in entering the fund market, better promote stable, healthy development of the fund market, and strive to build a standard, transparent, open, dynamic, resilient capital market.