Measures for the Administration of Stock Exchanges (Mainland China)

Joline Chen

The China Securities Regulatory Commission recently promulgated the amended Measures for the Administration of Stock Exchanges (the “Measures”), which consist of 9 chapters and 90 articles.  The amendments to the Measures begin with the nature and market role of stock exchanges and leverage the mature experiences of foreign stock exchanges to improve the internal governance structure and to further enable the stock exchanges to perform their first-line regulatory responsibilities.  The Measures will go into effect on January 1, 2018.

The Measures amend and improve provisions relating to the internal governance structure of stock exchanges.  A supervisory board is added along with further clarifications concerning the responsibilities and authority of the members, the board of directors, the board of supervisors and the general manager.  Meanwhile, the Measures highlight the self-regulatory characteristics of a stock exchange and specifically stipulate that its operational regulations formulated pursuant to law shall be binding to all entities participating in securities trading activities.

Another core aspect of the amendments of the Measures is the enhancement of the first-line regulation work by stock exchanges.  At the outset, exchanges will need to take self-regulatory measures and engage in focused monitoring against irregular trading behavior that may potentially mislead investors’ investment decisions or have improper impact on the trading prices and volume of securities.  Secondly, to strengthen the first-line regulatory responsibilities of the exchange to its members, corresponding member rules and technical management rules shall be drafted to clearly specify the members’ rights and responsibilities.  In addition, a stock exchange’s first line regulatory responsibility over listed companies is enhanced by requiring the stock exchange to perform its self-regulated duties regarding the information disclosure of listed companies, as well as the standards and procedures for the listing, suspension and resumption of trading of their securities on the exchange.  The Measures as amended will contribute to a stock exchange’s reorientation towards its fundamental roles, fulfill its organization, supervision, management and service obligations with respect to securities trading activities, optimize the allocation of market resources and service the economy.