Implementation Opinions of the General Office of the State Council on Straightening out and Rectifying Various Types of Trading Venues (GBF [2012] No. 37)

People's governments of all provinces, autonomous regions and municipalities directly under the Central Government, the ministries and commissions and directly affiliated institutions under the State Council:

In order to implement the Decision of the State Council on Straightening out and Rectifying Various Types of Trading Venues to Effectively Prevent Financial Risks (GF [2011] No. 38, hereinafter referred to as GF No. 38 Document), further clarify policy boundaries, measures and work requirements, solidly advance the work on straightening out and rectifying various types of trading venues, prevent financial risks and maintain social stability, upon the approval of the State Council, the following opinions are hereby put forward:

(I)  Comprehensively understand the range of clean-up and rectification

According to the principle of facilitating the development of the real economy in a standardized and orderly way, the range of clean-up and rectification is to be precisely defined with priorities being highlighted and the pertinence and effectiveness of clean-up and rectification of various trading venues being intensified. The range of clean-up and rectification this time includes various trading venues which are engaged in the trading of equity, mid-long-term trading of bulk stock and other standardized contract transactions, including the trading venues not named with “Exchange” but excluding the trading venues which are engaged only in barter trade such as the trading of vehicles or real estate. Among them, the trading of equity includes the trading of property rights, stock rights, creditor's rights, forest rights, mineral rights, intellectual property rights, equities of cultural artifacts and financial assets and others; mid-long-term trading of bulk stock refers to the standardized contract transactions, which take standardized contract of bulk stock as the trading object and adopt the method of electronically centralized trading, to allow traders to close a transaction by a way of offset, not for the purpose of delivering physical goods or not necessarily delivering physical goods; and other standardized contracts include the standardized contract with valuable securities, interest rate, exchange rate, index, carbon emission permits or emission rights as the subject matter.

The branches established by various trading venues are subject to the clean-up and rectification by the people's governments of the provinces, autonomous regions, or municipalities directly under the Central Government (hereinafter referred to as the provincial governments) where the branches are located in accordance with the principle of localized management.

The securities and futures exchanges established upon approval in accordance with law and the trading venues engaged in the trading of financial products which are established upon the approval of the financial management department of the State Council are not included in the range of clean-up and rectification this time.

(II) Accurately apply the policy boundaries of clean-up and rectification

Any trading venue and its branches in violation of one of the following provisions shall be cleaned up and rectified.

1     No equities may be divided into equal shares for public offering. Any trading venue's division of its equities into equal shares for sale to investors by utilizing its services and facilities falls into the scope of “public offering of equal shares”. Relevant provisions of the Company Law and the Securities Law are applicable to the public offering of shares of joint-stock companies.

2     No trading may be conducted by centralized trading methods. “Centralized trading methods” as mentioned in these Opinions include call auction, continuous auction, electronic matching, anonymous trading and market making and other trading methods, but auctions to be transferred by agreement or in accordance with law are excluded.

3     No equities may be listed and traded continuously in standard trading units. “Standard trading units” as mentioned in these Opinions refer to the minimum trading units set for equities other than stock rights by which or by whose integer multiple a trading is conducted. “Continuous listing and trading” refers to the sale of the same product by quotation within 5 trading days after its purchase or the purchase of the same product by quotation within 5 trading days after its sale.

4     Cumulative number of equity holders shall not exceed 200. Unless otherwise specified in laws and administrative regulations, the cumulative number of actual holders of any equity being offered or assigned during its duration shall not exceed 200. The number of trusted or entrusted holders shall be calculated as the number of actual holders.

5     No standardized contract transaction may be conducted by the method of centralized trading. “Standardized contract” as mentioned in these Opinions includes two types: One type of contract is uniformly prepared by the trading venues with its clauses except the price being fixed, and specifies a certain amount of subject matter shall be delivered at a given time and place; and another type of contract is uniformly prepared by the trading venues and specifies the buyer has right to buy or sell the subject matter as agreed at a given time and specific price.

6     Without approval of relevant financial management departments of the State Council, no trading venues engaged in trading of financial products such as insurance, credit and gold may be established, and any other trading venues shall not be engaged in trading of financial products such as insurance, credit and gold.

Financial institutions such as commercial banks, securities companies, futures companies, insurance companies and trust & investment companies shall not provide such services as underwriting, account opening, trusteeship, fund transfer, trading agency, investment consultation and insurance to the trading venues in violation of the above provisions. The financial institutions which have already provided the services shall timely carry out self-inspection and self-cleaning, and take appropriate remedial measures according to the requirements of relevant financial management departments.

(III)     Seriously implement the arrangement for clean-up and rectification

1     Check and identification. All provincial governments shall organize serious check and identification for compliance of trade category, trading method and number of investors as well as risk conditions in various trading venues in relevant regions according to the requirements of GF No. 38 Document and these Opinions. For trading venues in violation of provisions in GF No. 38 Document, it is prohibited to add new trade category.

2     Rectification and regulation If various trading venues fail to timely and properly correct their own problems, relevant provincial governments shall fulfill their regulatory responsibility and take corrective measures for those trading venues in question according to the requirements of GF No. 38 Document and these Opinions. If their trading rules are in violation of provisions in GF No. 38 Document, these trading venues shall not continue trading, and any suspended trading shall not be resumed. These trading rules shall be corrected according to relevant policies and regulations, and submitted to the provincial (municipal or regional) leading group of clean-up and rectification for approval. Any trading venue with products traded in violation of provisions in GF No. 38 Document shall cancel the illegally traded products and properly complete the remedial work; and any trading venue with cumulative number of equity holders over 200 shall be cleaned up.

3     Inspection and acceptance All provincial governments shall organize inspection and acceptance on rectification and regulation of various trading venues, They shall particularly check if articles, trading rules, trade categories, trading methods, investor eligibility and management system meet the requirements of GF No. 38 Document and these Opinions, and check if the trade information system meets the requirement of security and stability.

4     Classified disposition All provincial governments shall carry out classified disposition on various trading venues, to effectively close, rectify or regulate the trading venues in question. For trading venues to be necessarily retained, relevant approval procedure shall be implemented according to the requirements of GF No. 38 Document and these Opinions. If any trading venue refuses to rectify or fails to complete the rectification within the time limit without justified reasons, or continue the illegal trading of securities and futures, the provincial government shall close or ban such trading venue according to laws and regulations. During clean-up and rectification, all provincial governments shall take effective measures to ensure the security of investor’s capital and the social stability. Any trading venue suspected of committing a crime shall be transferred to judiciary authorities and investigated for legal liability of personnel concerned according to law.

After the work of clean-up and rectification is basically completed, all provincial governments shall make a complete summary on process of clean-up and rectification, policies and measures, acceptance results, daily supervision, risk disposition and other circumstances, and provide written reports to the Inter-ministerial Joint Conference on Rectification of Various Trading Venues (hereinafter referred to as “Joint Conference”) .

(IV)     Strictly implement the approval policies for trading venues

1     Adhere to the establishment principle for various trading venues.

All provincial governments shall adhere to the principle of “Total quantity control, rational distribution and prudent approval”, i.e. make overall plan for quantity, scale and regional distribution of various trading venues; prepare category and structure plans and review standards for trading venues; and prudently approve the establishment of trading venues, to make the establishment of trading venues in line with the regulation capability and the development level of real economy.

2     Strictly regulate the approval for establishment of trading venues.

(1)   Any new exchange (except those as approved by the State Council or the financial management department of the State Council) must be submitted to the provincial government for approval. Before approval by provincial government, the written feedback opinions of Joint Conference shall be obtained.

(2)   Exchanges already established and operated before clean-up and rectification shall be separately disposed according to the following conditions:

Any exchange as approved by the provincial government, which is to be necessarily retained and not in violation of provisions in GF No. 38 Document and these Opinions, shall be confirmed by the provincial government; the exchange in violation of provisions in GF No. 38 Document and these Opinions shall be cleaned up and rectified, and its clean-up and rectification shall be inspected and accepted by the provincial government. The exchange which is accepted may continue operating. All provincial governments shall submit the lists of the above two types of exchange separately to the Joint Conference for the record.

For any exchange which is not approved by the provincial government, but accepted after clean-up and rectification and proposed to be retained, relevant approval procedure shall be implemented according to the requirements for new trading venues. Before approval by provincial government, the written feedback opinions of Joint Conference shall be obtained.

Previously formed exchange, which is engaged in barter trade such as the trading of vehicles or real estate, has not violated the provisions in GF No. 38 Document and these Opinions, and proposes to be named with “Exchange”, shall be disposed by the provincial government according to actual conditions, and the list of exchanges shall be submitted to the Joint Conference for the record.

(3)   In principle, trading venues which are engaged in the trading of equity, mid-long-term trading of bulk stock and other standardized contract transactions shall not set up branches for business operations. The branches to be necessarily established shall be approved by the provincial government where such trading venue is located and the provincial government where the establishment of branches is proposed according to the principle of localized management, and shall be regulated by relevant provincial government. For the operational branches which have already established and operated without approval of the provincial government, the approval procedure shall be implemented according the above requirements. For the branches in violation of the above provisions, the industrial and commercial administrative departments in relevant regions shall not go through the industrial and commercial registration, and shall dispose according to relevant provisions of industrial and commercial administration.

The regulation methods for various trading venues not named with “Exchange” shall be prepared by relevant provincial governments.

(V) Effectively implement the requirements for clean-up and rectification

1     Unify policies and standards. During clean-up and rectification, all provincial governments shall unify policies and standards, and grasp the policy boundaries in strict accordance with the requirements of the State Council, the Joint Conference and relevant departments. Any problem identified or poor understanding of relevant policies during the implementation shall be timely reported to the Joint Conference.

2     Prevent and eliminate the risks. During clean-up and rectification, all provincial governments shall prepare a complete risk disposition plan, carefully identify any dispute and hidden risk, timely master the market trend, and properly handle the petitions and complaints. The provincial governments shall strengthen the coordination with judiciary authorities; seriously investigate and treat suspected criminal activities such as misappropriation of clients' capital and fraud; properly handle the emergencies; protect the legal interests of investors; prevent and eliminate the financial risks; and maintain the social stability.

3     Fulfill the regulatory responsibility. All provincial governments shall establish regulatory systems for various trading venues in relevant regions; define the regulatory organizations and functions for various trading venues; strengthen daily supervision; establish long-term mechanism; continuously and properly carry out statistical monitoring, violation handling and risk disposal for various trading venues. Relevant provincial governments shall strengthen communication, coordination and information sharing. The members of Joint Conference and relevant departments of the State Council shall carry out proper supervision, inspection and direction.

General Office of the State Council

　　July 12, 2012