CHINA: Shenzhen Stock Exchange Strengthens Institutional Construction of Membership Self-discipline Rules

Tuesday May 5 2015

The Shenzhen Stock Exchange (SZSE) Membership Management Rule was promulgated and implemented in 2007 and is due to be revised due to the significant changes in legal environment, market situations, industry conditions.

The contents being revised mainly cover the following aspects:

• to improve the investor suitability management and strengthen the protection of investors by 1) requesting members to establish a management mechanism based on customer classification and product grading, and 2) requesting members to prompt risk to investors in a timely manner and specifying the risk warning delivery mechanism for high-risk securities such delisting, etc.;
• to strengthen investor education and services and enhance investors’ risk awareness by requesting members to include investor education into each business segment, enrich the forms and contents of investors education and enhance its effectiveness, and establish a evaluation mechanism of investor education to arouse the initiative of members;
• to emphasize compliance management and risk control of members and safeguard trading security in the markets by requesting members to optimize the functions such as trading verification and authority management in their technical systems in a bid to implement front-end control of proprietary trading, asset management, etc., and establish a reporting mechanism of programming trading and innovative business in a bid to identify and prevent trading risks in a timely manner;
• to improve customer trading behaviour management and guide investors to participate in the markets in compliance with laws and regulation by requesting members to perfect trading monitoring system to give timely notice or reminder to customers about abnormal trading behaviours, and establish a key monitoring mechanism for accounts of serious abnormal trading behaviours;
• to optimize the trading participant management system which can adapt to the development needs of new business such as “Shenzhen-Hong Kong Stock Connect” and options, and to perfect the system of diversified trading participants; and
• to actively promote decentralization and deregulation and increase the of the transparency of rules and the efficiency of regulation by reducing reporting requirements on members, specifying the eligibility for membership application, termination conditions and handling procedures, and adjusting to and enriching measures for self-discipline management.

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