SHANGHAI (Reuters) – China’s securities regulator released draft rules on Friday to strengthen supervision of company listings, delistings and computerized trading programs, aiming to improve the stock market and protect interests of investors.
The China Securities Regulatory Commission (CSRC) will raise the bar on initial public offerings (IPOs), force unqualified companies to delist and strengthen supervision of high-frequency trading, according to a draft rules submitted to the public.
Chinese authorities are stepping up efforts to revive investor confidence in the world’s second-largest stock market. The blue chip index has rebounded from five-year lows hit in February, but is still struggling to stand on its feet.
“We will move towards people-centered value and protect investors, especially small investors, more effectively,” CSRC Chairman Wu Qing said in an article published on the watchdog’s website.
“We will set up a comprehensive supervision system so as to regulate with ‘tooth and thorns,'” said Wu, who earned the nickname “butcher broker” during an earlier period of regulation.
To improve the quality of listed companies, the CSRC said it plans to moderately increase listing requirements in terms of sales and net profit for companies seeking to list on the main board and technology-focused ChiNext.
The bar will also be raised for companies targeting Shanghai’s tech-focused STAR Market.
Meanwhile, regulators will increase the number of randomly selected on-site inspections to 20% of listing applicants, from 5% previously. The number of on-site inspections of insurers will also be increased, the CSRC said.
PROGRAM TRADING
The CSRC also proposed stricter control of program trading and high-frequency trading to maintain market fairness.
The regulator already cracked down on data-driven quantitative funds earlier this year, saying some institutions get an unfair advantage over retail investors. In February, Chinese stock exchanges banned a quantum fund manager from trading for three days, saying he had broken trading order rules.
The trading program, in which orders are entered automatically using computers, “must comply with the principle of fairness and must not endanger the trading system or disturb the market order,” CSRC said in draft rules on Friday .
The rules require the creation of a reporting system for the trading program, with high-frequency trading subject to higher disclosure requirements and higher commissions.
Both domestic and foreign capital will be included in the transaction reporting system and will be subject to the same transaction monitoring standards, the CSRC added.