Enhance market stability, expect management to prevent risks for a long time ｜ Detailed explanation of the new ＂National Nine Articles＂ of the capital market
Author: Securities Times reporter Wu Shaolong Zhang Shuxian Yu Shipeng Li Mingzhu
Introduce procedural trading regulations and strengthen the supervision of high-frequency quantitative trading; Formulate operating rules for private equity funds; Improve the measures to deal with extreme situations; Seriously investigate and deal with illegal acts such as manipulating the market and maliciously shorting … Recently, the State Council issued "Several Opinions on Strengthening Supervision and Preventing Risks to Promote the High-quality Development of the Capital Market" (hereinafter referred to as the new "National Nine Articles"), which released a clear policy signal on transaction supervision.
A number of market participants said in an interview with the Securities Times reporter that the new "National Nine Articles" put forward a series of specific measures to strengthen transaction supervision, practiced the political and people-oriented nature of capital market supervision, and maintained an "open, fair and just" market order, which also reflected the full consideration of the national conditions and market conditions of China’s capital market.
Standardize the development of procedural transactions
The new "National Nine Articles" clearly requires the introduction of procedural transaction supervision regulations and the strengthening of supervision over high-frequency quantitative transactions. This is the first time that procedural transaction supervision has been written into the new "National Nine Articles".
At the same time, the CSRC plans to issue the Regulations on the Management of Programmatic Trading in the Securities Market (Trial) (hereinafter referred to as the "Regulations"). Shanghai and Shenzhen Stock Exchanges have successively issued detailed business rules and specific measures.
A number of market participants interviewed told reporters that the purpose of programmatic transaction supervision is more to regulate development than to restrict it.
The data shows that China’s programmed trading started late but developed rapidly. At present, the market value of programmed trading investors accounts for about 5% of the total market value of A shares, and the transaction amount accounts for about 29%. By the end of last year, the whole market reported 119,000 programmed trading accounts. In comparison, programmatic transactions in some mature markets account for more than 50%.
Regarding the influence of programmed trading, the market thinks that it has two sides, on the one hand, it can enhance market activity and improve market liquidity; On the other hand, programmed trading, especially high-frequency trading, has obvious advantages in technology, information and speed, and there are also problems such as strategic convergence and trading resonance, which are easy to increase market volatility.
Tang Zhehui, deputy managing partner of Ernst & Young’s audit service in Central China, said in an interview with the Securities Times reporter that bringing programmatic trading into a reasonable and legal supervision system can enhance market transparency, reduce black-box operations and unfair competition in transactions, and promote the development of programmatic trading norms, which is conducive to investors making more informed trading decisions and promoting the healthy development of the market.
The "Management Regulations" also adhere to the "principle of consistency between domestic and foreign investment" and make arrangements for the supervision of northbound programmed transactions.
Northbound investors are important users of programmed transactions. The "Management Regulations" clarify that both domestic and foreign capital are included in the transaction reporting system. Since September last year, the stock exchange has established and implemented a programmed transaction reporting system. At present, all kinds of investors, including public offering, private placement and brokerage, have been included in the reporting scope. As participants in the mainland market, northbound investors should be included in the reporting system.
The reporter learned that at present, the preliminary idea of information reporting for northbound investors has been studied and formed. The contents of the report are generally consistent with those of mainland investors, including basic account information, capital information and trading strategy. On the reporting path, it is considered that investors should report to Hong Kong brokers first, and then the Hong Kong Stock Exchange will provide them to the Shanghai and Shenzhen Stock Exchanges through the Shanghai-Shenzhen-Hong Kong Stock Connect supervision and cooperation arrangement. In terms of implementation arrangements, a transition period will be set for stock investors, who can complete the report during the transition period, and new investors can only carry out programmatic transactions after completing the report.
Differentiated supervision of high-frequency transactions
In addition to procedural transactions, standardizing high-frequency transactions is also an important measure to strengthen transaction supervision in the new "National Nine Articles".
At present, the screening criteria for high-frequency transactions in stock exchanges are that the highest declaration rate per second is more than 300, or the highest declaration per day is more than 20,000. From the screening results, the number of high-frequency trading accounts is generally small, but the transaction amount is large, accounting for about 60% of the programmed transaction amount.
From the perspective of overseas markets, high-frequency trading has always been the focus of attention of regulators in various countries. For example, Japan imposes compulsory registration on high-frequency transactions, while the European Union imposes differentiated charges on high-frequency transactions, while the United States regards the use of programmed transactions to implement "fraud" as market manipulation for punishment.
The "Management Regulations" for public consultation fully draws on the experience of international market supervision, and from the perspective of maintaining market fairness and transaction order, puts forward stricter differentiated supervision requirements for high-frequency transactions, covering additional reporting mechanisms, differentiated fees, and appropriate and strict transaction supervision.
Tang Zhehui said that strict supervision of high-frequency trading may affect the reaction speed and trading income of some investors who rely on high-frequency trading strategies, but the overall institutional arrangement still reflects the idea of "pursuing advantages and avoiding disadvantages and standardizing development". The implementation of differentiated regulatory requirements shows that the regulatory authorities do not want to shut out high-frequency trading, but they cannot let it go. Instead, they hope to improve the security and stability of the system by controlling negative factors and better promote the healthy development of the capital market.
Tian Lihui, dean of the Institute of Financial Development of Nankai University, said that the Management Regulations strengthen the supervision of high-frequency transactions and highlight the investor-oriented concept, which is in line with the reality that small and medium-sized investors account for the majority in China’s market, and can also avoid the risk of large market fluctuations to a certain extent in actual operation.
Strengthen the deterrent force and improve the expected management.
In addition to programmatic trading and high-frequency trading, the new "National Nine Articles" also proposed to strengthen the supervision of transactions, including formulating the operating rules of private equity funds, improving the countermeasures in extreme situations, and seriously investigating and handling illegal acts such as manipulating the market and maliciously shorting, so as to maintain a high-pressure situation of "zero tolerance" for illegal transactions.
The new "National Nine Articles" also proposes to improve the expected management mechanism, incorporate the impact assessment of major economic or non-economic policies on the capital market into the macro-policy orientation consistency assessment framework, and establish a coordination mechanism for the release of major policy information.
A series of measures are aimed at enhancing the internal stability of the capital market.
Ma Kewei, managing director of Ming Ze Investment, said in an interview with the Securities Times reporter that strict investigation of market manipulation and malicious shorting is expected to effectively crack down on short-selling forces, strengthen the fairness and transparency of the market, and be conducive to the healthy development of the capital market; Perfecting the regulatory standards for abnormal trading and market manipulation can prevent unfair trading from distorting the market order and harming the interests of investors.
Tang Zhehui also said that the new "National Nine Articles" proposed to strengthen the inherent stability of the capital market, strengthen the bottom line thinking, and improve the response measures to extreme situations, indicating that the regulatory authorities will take decisive measures to correct the situation when the market is seriously out of the fundamentals, such as irrational drama, liquidity exhaustion, market panic and serious lack of confidence, and resolutely prevent systemic risks.
After a lapse of ten years, the State Council recently issued the guidance document on capital market, Several Opinions on Strengthening Supervision and Preventing Risks to Promote High-quality Development of Capital Market (hereinafter referred to as the new "National Nine Articles"). The new "National Nine Articles" points out that we should establish a market ecology that fosters long-term investment, improve the basic system that adapts to long-term investment, and build a policy system that supports "long-term investment with long money". In particular, it is necessary to vigorously develop equity Public Offering of Fund and substantially increase the proportion of equity funds.
When the new "National Nine Articles" called for the promotion of medium and long-term funds to enter the market, it specifically mentioned institutional investors such as public offerings and insurance funds.
In Public Offering of Fund, the new "National Nine Articles" indicated that the proportion of equity funds should be greatly increased, and pointed out several development trends. In terms of products, it has established a fast approval channel for trading open index funds (ETFs), promoted the development of indexed investment, and enriched Public Offering of Fund’s investable products and portfolios. In terms of system, it includes reducing the comprehensive rate of Public Offering of Fund industries, and studying and standardizing the compensation system of fund managers.
The new "National Nine Articles" also mentioned that it is necessary to optimize the policy environment for equity investment of insurance funds, implement and improve the performance evaluation methods of state-owned insurance companies, and better encourage long-term equity investment. In addition, it is necessary to improve the investment policies of the national social security fund and the basic old-age insurance fund. Improve the flexibility of investment in enterprise annuities and personal pensions. Encourage bank wealth management and trust funds to actively participate in the capital market and increase the scale of equity investment.
The new "National Nine Articles" also pointed out that fund companies should solve the problem of "funds make money and investors don’t make money" and require fund companies to change to investors’ return-oriented.
Huibaichuan Fund believes that the new "National Nine Articles" and a series of new regulations of China Securities Regulatory Commission are another "epic" major institutional progress in the market since the "share-trading reform", and the core is to "establish an investor-centered" capital market. Bosera Fund said that promoting the high-quality development of equity-based Public Offering of Fund is the primary starting point for the new "National Nine Articles" to promote medium and long-term capital to enter the market and continuously expand the long-term investment power.
The call for promoting medium and long-term capital to enter the market has been highly recognized by the market. So, what is the current situation of long-term capital? What role does Public Offering of Fund play?
Shen Bing, Director of the Institutional Department of the China Securities Regulatory Commission, publicly stated that by the end of last year, all kinds of professional institutional investors had a total market value of 16 trillion yuan in A-share circulation, which more than doubled in five years, and the shareholding ratio increased from 17% to 23%. Among them, Public Offering of Fund holds 5.1 trillion yuan of circulating market value of A-shares, and its shareholding ratio has increased from 4% to 7.3%, making it the largest professional institutional investor in A-shares.
However, Shen Bing also said that the total amount of long-term funds in the current capital market is still insufficient, the supporting mechanism is not perfect enough, and the policy environment of "long money and long investment" has not been fully formed. Among them, Public Offering of Fund, as the representative of equity investment in the asset management industry, has a low proportion of equity products and insufficient market leading power.
Yang Delong, chief economist of Qianhai Kaiyuan, said that only by continuously introducing long-term funds can the stability of the capital market be continuously improved, and the new "National Nine Articles" pointed out the direction for this. "As the largest institutional investor in Public Offering of Fund, in the current scale of public offering management of about 28 trillion yuan, equity funds account for less than 10 trillion yuan, which is still relatively low, and the proportion will continue to increase in the future."
Smooth "raising investment and managing withdrawal" venture capital expects the policy to be implemented.
A few days ago, the State Council issued "Several Opinions on Strengthening Supervision and Preventing Risks to Promote the High-quality Development of the Capital Market", which consists of nine parts (hereinafter referred to as the new "National Nine Articles"). Many of them involve the whole chain of venture capital industry, which has a significant impact on the primary market.
Many people in the industry who were interviewed expressed a common view. Article 8 mentioned "further unblocking the circulation of’ raising investment and managing withdrawal’ and giving full play to the role of venture capital and private equity investment in supporting scientific and technological innovation", which has the highest correlation with investment in the primary market. It not only gives opinions on the current difficulties faced by the industry, but also reaffirms the role of venture capital in supporting scientific and technological innovation.
Shen Zhiqun, vice president of China Investment Association and chairman of the Venture Capital Committee, told the Securities Times reporter that the formulation of Article 8 mentioned above is the implementation of the spirit of the important instructions of the Central Economic Work Conference at the end of last year on "encouraging the development of venture capital and equity investment". It is hoped that the relevant government departments will further concretize and implement the relevant policies of the new "National Nine Articles".
LP Investment Gu, who has been paying attention to the primary market for a long time, believes that China’s economy has entered the stage of innovation-driven and high-quality development, and the entire venture capital industry urgently needs the top-level design of mechanism, institutional innovation and system to break the long-term capital bottleneck and inject liquidity into the primary market.
In the third article of the new "National Nine Articles", it is proposed to "comprehensively improve the system of rules for reducing holdings. Introduce management measures for listed companies to reduce their holdings and classify different types of shareholders. " The industry expects a new breakthrough in the policy of reducing the shareholding of venture capital shareholders, especially for institutions that have invested in the early stage and given support at the earliest stage of enterprise development. After listing, the reduction of shareholding can be reasonably withdrawn to gain new liquidity, so as to better realize capital circulation and complete the mission of innovative capital supporting early scientific and technological innovation.
Shen Zhiqun said that it is necessary to confirm that venture capital enterprises are investors in the capital market, strictly distinguish them from the financiers of the major shareholders of listed companies, and effectively protect the legitimate rights and interests of venture capital enterprises, especially for invested enterprises that invest in early investment and small investment in technology and innovation, give equal priority to listing, fully implement the differentiated supervision mode of venture capital enterprises, effectively implement the "reverse linkage" system of venture capital equity reduction, and gradually solve the problem that the venture capital industry is not smooth from fundraising to withdrawal.
Article 7 points out: "Establish a market ecology that fosters long-term investment, improve the basic system that adapts to long-term investment, build a policy system that supports’ long-term investment’ … optimize the policy environment for equity investment of insurance funds, implement and improve the performance evaluation methods of state-owned insurance companies, and better encourage long-term equity investment." This is also a topic of common concern to the industry.
China’s venture capital industry is facing the common problems of serious shortage of long-term capital supply and urgent optimization of capital structure. In this regard, some venture capital institutions from Shenzhen suggest that large insurance institutions should be encouraged to contribute to venture capital funds by changing the investment performance appraisal mechanism and expanding the proportion of insurance funds entering venture capital; At the same time, we will encourage part of the balance of local social security pensions to enter venture capital funds in cities with abundant balances, such as Shenzhen.
The new "National Nine Articles" will further raise the threshold for listing and bring greater challenges to the entire venture capital industry. Although venture capital exit faces a more difficult environment, the policy still encourages diversified exit channels. Article 8 clearly points out that "we should intensify the reform of M&A and take various measures to activate the M&A and restructuring market."
Shen Zhiqun said that a stable and healthy capital market is of great significance to the sustained and efficient operation of venture capital enterprises, an important investment subject active in the capital primary market. Venture capital institutions should not only find out that the value is well invested, but also need to realize the value retreat smoothly and efficiently.
Article 9 also proposes "to implement and improve the tax policies of listed companies’ equity incentives, medium and long-term funds, private equity venture capital funds, real estate investment trust funds, etc.", all of which are aimed at opening up many pain points and blocking points faced by the whole industry ecology, but it is still necessary for the whole industry to form a consensus and work together to jointly explore and establish a long-term capital development path with China characteristics.