CHINA: SSE Issues Business Rules and Supporting Business Guidelines for Market-making Trading of Stocks

Thursday July 21 2022

On 15^th July 2022, the Shanghai Stock Exchange (SSE) issued and implemented the exchange detailed rules for Implementation of market-making Trading of Stocks on the Star Market.

The launch of the market-making mechanism for the Star Market is an important measure to continuously improve the basic system of the capital market and the Implementation Opinions propose to introduce the market-making mechanism when conditions permit on the basis of auction trading.

In accordance with the Pilot Regulations on Market-making Trading of Stocks on the Star Market by Securities Companies. it has formulated the Detailed Rules for Implementation and supporting business guidelines and solicited public opinions to the market.

The main contents include:

First, it clarifies the application and termination of market-making services. The application for market-making services for Star Market stocks adopts a filing system. Securities companies qualified for market-making trading of listed securities may provide market-making services for specified stocks on the Star Market after filing with the SSE.

Second, it clarifies the rights and obligations of market makers. Market makers shall meet the SSE’s requirements on market-making indicators when conducting market-making business. The SSE will regularly evaluate market makers and reward those who actively fulfill their obligations, such as reducing transaction fees appropriately.

Third, it clarifies the supervision and management of market makers. Market makers shall improve their risk management and internal control systems, establish risk prevention and business isolation mechanisms, and ensure that market-making business is conducted in a compliant and orderly manner.

The introduction of market-making mechanism for the Star Market is a useful attempt to further play the role of a “test field” for the reform of the Star Market. Next, the SSE will actively promote the work related to the market-making mechanism of the Star Market under the guidance of China Securities Regulatory Commission (CSRC) make every effort to ensure the smooth and orderly implementation of the pilot work, and continuously promote the quality development of the Star Market.

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