China Regulators Tighten Supervision of Securities Lending Business
In a move to strengthen market stability and investor confidence, the China Securities Regulatory Commission announced new measures to tighten supervision of the securities lending business. The announcement on January 28 detailed two key aspects of the new regulations.
Firstly, the lending of restricted stocks will be comprehensively suspended, effective immediately. This move aims to reduce supply pressure on the market and stabilize the stock prices of companies with a large number of restricted shares. Additionally, it is expected to boost the confidence of small and medium investors and stabilize market sentiment.
Secondly, the efficiency of securities lending will be limited, with the market-based application for securities lending being adjusted from real-time availability to next-day availability starting from March 18. This measure will reduce sources of securities lending available in the market and increase the cost of short selling for some investors, ultimately helping to maintain the smooth operation of the capital market and boosting investor confidence in A-shares.
Market participants believe these measures will have a tightening effect on securities lending, ultimately stabilizing the market and boosting investor confidence. Tian Lihui, dean of Nankai University’s Institute of Financial Development, emphasized that these measures are an important step for the counter-cyclical adjustment work of the China Securities Regulatory Commission and will help the market gradually move out of the bottom area.
The China Securities Regulatory Commission stated that these changes reflect the investor-oriented regulatory concept and the aim to create an open, fair, and just market order. It also emphasized the need to crack down on illegal activities using securities lending to reduce holdings and cash out.
The commission also mentioned that it will continue to strengthen supervision, putting the fairness of the system in a more prominent position. It will evaluate the operating effects promptly, maintain market order in accordance with the law, and effectively protect the legitimate rights and interests of investors.
The move to strengthen supervision of the securities lending business comes after the cancellation of special asset management plans and strategic placements in October 2023. The China Securities Regulatory Commission has made it clear that it will continue to take measures to optimize the securities lending mechanism and ensure fair and reasonable market conditions.
With the regulatory focus shifting towards fairness and strict supervision, it is expected that these measures will have a positive impact on the stability and integrity of the Chinese securities market.