The China Securities Regulatory Commission has approved the suspension of the securities lending business as of this Thursday, as well as an increase in the required margins in order to reinforce countercyclical regulation and maintain the stable functioning of the market.
In a statement, the Chinese CNMV has reported that “in order to effectively respond to investors’ concerns and maintain the stable operation of the market” it has approved the request of the China Securities Finance Corporation to suspend the securities lending business to starting July 11, 2024.
However, the financial regulator has specified that existing securities lending contracts can be extended, although they must be settled no later than September 30.
Likewise, it has approved that, as of July 22, the stock exchanges will increase the margin ratio for securities lending from at least 80% to 100%, while the margin ratio for private investment funds in securities participating in securities lending of not less than 100% to 120%.
The Commission has stressed that, in accordance with market conditions, it will strengthen daily supervision and countercyclical regulation, crack down on illegal and irregular behavior such as improper arbitrage, ensure stable market operation, and effectively safeguard the interests of investors. .
In this sense, it has expressed its intention to “exhaustively” implement the requirements to reduce the negative impact of high-frequency trading and effectively maintain the commercial fairness of the market for which the exchanges must issue detailed implementation rules as soon as possible and standards of monitoring.
“We will resolutely investigate and punish those who use programmed trading, especially high-frequency quantitative trading, to engage in illegal and irregular activities in accordance with the law,” he said.
