CHINA: Shanghai Stock Exchange amends rules on China ETF margin trading and China short selling

Thursday May 30 2013

On 29th May the Shanghai Stock Exchange issued a circular to amend rules on margin trading and China short selling of exchange-traded funds (ETFs). The amended rules will take effect on 3rd June 2013.

Per the circular, when the outstanding value of a single ETF margin-trading account reaches 75% of its tradable value, or the number of the outstanding ETF short-selling shares accounts for 75% of the tradable volume, the SSE will suspend the China ETF margin trading margin trading and China short selling of this ETF on the following trading day until the proportion falls below 70%. However, the SSE will not impose restrictions on the margin trading and short selling of an ETF where the outstanding value of its margin-trading account is 25 to 75% of its tradable value, or the number of its outstanding short-selling shares accounts for 25 to 75% of its tradable volume.

This follows a notice of 24th May 2013 on conditions for taking ETFs as underlying securities of margin trading and securities lending. This provides that any ETF taking cross-market index or cross-border index as its tracking target which meets the following requirements can be taken as an underlying security of margin trading and securities lending after being traded on the SSE for at least 5 trading days:

a. The average daily asset size is not smaller than RMB2 billion;

b. The number of fund holders is not less than 4,000.

Click on the above link for the Circular of 29th May (Chinese). Click here for the Notice of 24th May (English).