Heavyweight! The "100+1" A-share market is coming! Shanghai and Shenzhen Exchanges Enlarge Recruitment of Foreign Investment | Rules | A-share "100+1"

Release time:Apr 14, 2024 17:35 PM

Research will adjust the requirement for the number of applications for securities such as Shanghai Main Board stocks, Shenzhen listed stocks, and Shanghai and Shenzhen mutual funds from multiples of 100 shares to a minimum of 100 shares, increasing by 1 share. Meanwhile, studying the introduction of post market fixed price trading mechanisms into ETFs

On the evening of August 10th, the Shanghai and Shenzhen Stock Exchanges announced that, based on thorough research and listening to market opinions, they will accelerate the implementation of a series of practical measures in improving trading systems and optimizing trading supervision, in order to better stimulate market vitality, enhance trading convenience and smoothness, and continuously enhance market attractiveness.

The Shanghai and Shenzhen Stock Exchanges stated that the next step will be to accelerate the improvement of business plans, modify business rules, promote technological transformation, organize market participants to do relevant testing and supporting preparations, promote the improvement of trading systems and optimize trading supervision measures to be implemented as soon as possible, and launch one mature one to continuously stimulate market vitality.

The minimum unit for adding positions on the main board is planned to be changed to 1 share

One major measure of the Shanghai and Shenzhen Stock Exchanges to improve their trading system this time is to study allowing the number of securities declared on the main board of the Shanghai Stock Exchange, listed stocks on the Shenzhen Stock Exchange, and mutual funds to increase by one share.

In the early stages of the development of the securities market, in order to facilitate trading matching processing, it was usually stipulated that order declarations should be made in whole hands, that is, one hand or its integer multiples. At present, the Shanghai Main Board and Shenzhen Stock Exchange still use this practice, where the declared quantity of securities such as stocks, funds, and depositary receipts should be 100 shares or an integer multiple of them.

"With the rapid development and efficiency improvement of automated electronic trading, as well as the continuous improvement of trading mechanisms, the necessity of bulk trading has gradually weakened, and reducing the minimum trading unit has become a common trend in overseas markets. Many markets have adjusted the minimum trading unit to 1 share. According to the relevant person in charge of the Shanghai Stock Exchange, the requirement of multiples of 100 shares was also lifted when the Science and Technology Innovation Board was established. The number of declared shares above 200 can increase by 1 share, such as 201 shares, 260 shares, etc.".

According to institutional analysts, based on the practical situation in the domestic market, investors have a greater demand for zero share declaration of stocks on the Science and Technology Innovation Board, while there are a large number of small and medium-sized investors in the main board market with limited funds, and there will be a greater demand for zero share declaration. If the minimum trading unit is changed to 1 share, it may increase the number of declared zero shares and further enhance the liquidity of the main board.

He also stated that changing the minimum trading unit to 1 share can reduce the tracking error of ETFs. Due to the fact that the minimum trading unit for mainboard stocks is 100 shares, the constituent stocks for ETF redemption need to be calculated and rounded, which may differ from the actual number of stocks calculated based on index weights.

In addition, the main board stocks may generate zero holdings due to situations such as stock dividends, rights issues, and conversions. Therefore, trading rules allow zero holdings to be declared for sale at once, while buying orders can only be multiples of 100 shares. When the counterparty is a zero share sell order, investors can still only declare a full buy order, which cannot avoid partial transactions and may cause inconvenience in trading.

Another major initiative is to study the introduction of post market fixed price trading mechanisms in ETFs. After market fixed price trading refers to the trading method in which investors buy and sell stocks at the closing price through closing price commission after the bidding trading is completed.

At present, post market fixed price trading is only applicable to stocks on the Science and Technology Innovation Board and the Growth Enterprise Market, and ETFs cannot participate in post market fixed price trading.

In the view of the above-mentioned institutional personnel, if ETFs introduce fixed price trading after market hours, on the one hand, it will help reduce the impact of large volume trading on prices. The introduction of post market fixed price trading mechanism in ETFs can provide investors with a high-value trading channel without affecting intraday trading.

On the other hand, trading time can be extended to facilitate investor trading. At present, post market fixed price trading ends at 15:30, which extends the trading time by half an hour compared to competitive trading. After the inclusion of ETFs in the Hong Kong Stock Connect, foreign investors can participate in ETF trading, and the opening of fixed price trading after market hours can connect with the trading time of overseas markets, which is conducive to promoting high-level opening-up to the outside world.

Optimize transaction supervision

Optimizing trading supervision is another measure taken by the Shanghai and Shenzhen Stock Exchanges to promote active markets.

Specifically, one is to balance maintaining smooth trading and combating excessive speculation, ensuring the effective functioning of the market.

Market insiders believe that the statements made by the Shanghai and Shenzhen Stock Exchanges indicate that more attention will be paid to problem oriented and goal oriented trading supervision in the future. While not interfering with normal trading and ensuring reasonable trading needs, the targeted and precise supervision will be further improved, with a focus on regulating abnormal trading behaviors such as excessive speculation and suspected illegal activities that seriously affect market order and infringe on investor rights. The above measures will be conducive to preventing excessive speculative risks, cracking down on illegal trading behaviors, and creating a good market ecological environment for active and orderly market transactions.

Secondly, it is to release an English version of the transaction supervision business rules to enhance the convenience of foreign investment transactions.

When the Science and Technology Innovation Board was established in 2019, the Shanghai Stock Exchange released the "Real time Monitoring Rules for Abnormal Trading of Stocks on the Science and Technology Innovation Board", which publicly disclosed the monitoring standards for abnormal trading. In February of this year, the Shanghai Stock Exchange formulated and released the "Real time Monitoring Rules for Abnormal Trading of Main Board Stocks", publicly disclosing the qualitative description and quantitative indicators of typical abnormal trading behaviors of Main Board stocks, and synchronously revising the "Real time Monitoring Rules for Abnormal Trading of Science and Technology Innovation Board Stocks".

"The subsequent release of English versions of relevant business rules and the improvement of a concise and friendly rule system will further enhance the convenience of foreign investment transactions and create a more friendly institutional environment for foreign investment to actively participate in A-share trading," said the aforementioned market participants.

Thirdly, it is to strengthen the promotion of trading regulatory rules and further clarify market expectations.

In the industry's view, with the continuous increase in the promotion of the rules of the Shanghai and Shenzhen Stock Exchanges, it will effectively enhance the predictability and recognition of trading supervision by market entities, and lay a broad market foundation for further stimulating market vitality and enhancing market resilience.

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