China approves suspension of securities relending
11 July 2024 China
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The China Securities Regulatory Commission (CSRC) has approved the suspension of applications for securities relending, a tool used for short selling, aiming to stabilise the capital markets.
The suspension will take effect from today [Thursday, 11 July]. Existing securities lending contracts can be extended, but must be settled no later than 30 September.
According to the CSRC, the move will “further strengthen the counter-cyclical regulation of securities lending”.
The stock market regulator has also approved to raise margin requirements for short sellers.
It will increase the margin ratio for securities lending from no less than 80 per cent to 100 per cent, and the margin ratio for private securities investment funds participating in securities lending from no less than 100 per cent to 120 per cent, which will be implemented from 22 July.
The CSRC has taken a series of measures to “strengthen the supervision of securities lending and securities lending business” since last August, through restricting strategic investors from allocating shares for lending and raising the margin ratio for securities lending. This has come as a result of investor concerns and market conditions.
Responding to the new restrictions, the Pan Asia Securities Lending Association (PASLA) says: “The CSRC has removed any remaining equity leverage from the margin trading market and taken further action to reduce securities lending capacity from the equity market, describing this as a counter-cyclical measure.
“The CSRC detailed that securities lending activity accounts for approximately 0.20 per cent relative to the total A Share traded volumes as of June 2024.
“PASLA expects this to be a temporary measure. We encourage the CSRC and policymakers to engage with our membership as they adapt the market structure, and we will continue to support efforts to ensure that securities firms educate all categories of investors about appropriate market behaviours and business practices.”
The suspension will take effect from today [Thursday, 11 July]. Existing securities lending contracts can be extended, but must be settled no later than 30 September.
According to the CSRC, the move will “further strengthen the counter-cyclical regulation of securities lending”.
The stock market regulator has also approved to raise margin requirements for short sellers.
It will increase the margin ratio for securities lending from no less than 80 per cent to 100 per cent, and the margin ratio for private securities investment funds participating in securities lending from no less than 100 per cent to 120 per cent, which will be implemented from 22 July.
The CSRC has taken a series of measures to “strengthen the supervision of securities lending and securities lending business” since last August, through restricting strategic investors from allocating shares for lending and raising the margin ratio for securities lending. This has come as a result of investor concerns and market conditions.
Responding to the new restrictions, the Pan Asia Securities Lending Association (PASLA) says: “The CSRC has removed any remaining equity leverage from the margin trading market and taken further action to reduce securities lending capacity from the equity market, describing this as a counter-cyclical measure.
“The CSRC detailed that securities lending activity accounts for approximately 0.20 per cent relative to the total A Share traded volumes as of June 2024.
“PASLA expects this to be a temporary measure. We encourage the CSRC and policymakers to engage with our membership as they adapt the market structure, and we will continue to support efforts to ensure that securities firms educate all categories of investors about appropriate market behaviours and business practices.”
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