The full implementation of the registration system is a major reform involving the overall capital market. The release and implementation of the rules for the full implementation of the registration system marks the basic finalization of the institutional arrangements for the registration system, and marks the extension of the registration system to the entire market and various types of public offering of stocks. It is a milestone in the reform and development of China's capital market.

On February 17, 2023, in accordance with the unified deployment of the China Securities Regulatory Commission, the Shanghai Stock Exchange officially released 26 business rules, guidelines and business handbooks that are compatible with the full implementation of the stock issuance registration system. The relevant person in charge from the Shanghai Stock Exchange answered questions from the press on issues of market concern.

1. Please introduce the overall situation of the business rules released this time.

Answer: In order to implement the decision and deployment of the CPC Central Committee and the State Council on the full implementation of the registration system, under the unified leadership of the China Securities Regulatory Commission, the Shanghai Stock Exchange formulated or revised the supporting business rules for the full implementation of the registration system, and officially released the supporting rules to the market with the approval of the China Securities Regulatory Commission.

This time, the Shanghai Stock Exchange released 26 business rules, including 9 major business rules such as the Shanghai Stock Exchange Stock Issuance and Listing Review Rules that have received public opinions, and 17 supporting business rules, guidelines and business handbooks. These 26 rules, together with other rules of the SSE, have established a system of business rules to ensure the smoothness of the full implementation of the registration system in the SSE.

These 26 business rules cover the main institutional arrangements for the full implementation of the registration system in issuance and listing review, issuance underwriting, continuous supervision, trading organization management, and investor protection. Specifically, they include 4 categories: (1) 11 issuance and listing review rules, which are the issuance and listing review rules for IPO, refinancing, mergers and acquisitions, preferred shares, etc., as well as guidelines and handbooks on the acceptance of application documents, on-site supervision, and business consultation and communication. (2) 6 underwriting rules, including the detailed rules for the underwriting business of IPO and refinancing, the detailed rules for online and offline issuance, the working rules of the self-discipline committee, and the guidelines for listing announcements. (3) 2 ongoing regulation rules, namely the main board stock listing rules and the guidelines for major asset restructuring. (4) 7 trading organization and management rules, namely trading rules, detailed trading rules for margin financing and securities lending, measures for refinancing securities lending transactions, detailed monitoring rules for abnormal transactions on the main board and STAR Market, notice that stocks and depositary receipts under the registration system are temporarily not used as the underlying securities for stock pledge repurchase and agreed repurchase transactions, and handbook on the essential terms of the risk disclosure statement for the main board.

After the joint release of supporting business rules for the full implementation of the registration system, the SSE will promptly integrate and clean up other business rules, strengthen adaptability, integration and synergy, and further promote the construction of a "simplified and friendly" rule system.

2. Earlier, the Shanghai Stock Exchange publicly solicited opinions on 9 supporting business rules including the stock issuance and listing review rules. Please briefly provide relevant information.

Answer: From February 1 to February 8, 2023, the Shanghai Stock Exchange publicly solicited opinions from the market on 9 major business rules through channels and methods such as the official website, email, 400 hotline, and symposiums, and specifically solicited opinions on 4 detailed business rules from members, relevant market institutions and self-regulatory organizations. Questionnaires were distributed to broadly understand the evaluations of investors and market practitioners on the reform and their opinions on the work of the SSE.

In general, all parties highly agree with the full implementation of the registration system. It is generally believed that the full implementation of the registration system is of great significance for improving the multi-level capital market system, enhancing the ability of the capital market to serve the real economy, and helping the high-quality economic development, marking that the capital market has entered a new historical stage of development. All parties in the market fully acknowledge the supporting business rules for soliciting opinions, believing that they reflect the goals and requirements of the registration system reform.

As of February 8, the SSE has received a total of 128 specific opinions and suggestions related to the rules from various market entities. The SSE attaches great importance to the opinions and suggestions from all relevant parties and carefully studied them one by one. Among them, more than 30 opinions were adopted, mainly involving extending the time for submitting working papers on refinancing and reorganization by intermediary agencies, the optimization of the claw-back mechanism on the main board, and the code of conduct for offline investors' quotations. Among the opinions not adopted, some are issues at the implementation level, which will be reflected in the implementation of the rules; some are issues at the understanding level, and will be clarified by increasing training and publicity in the future; some are still controversial, and will be further studied in the future.

3. Please briefly introduce the Shanghai Stock Exchange Detailed Rules for Real-time Monitoring of Abnormal Stock Transactions on the Main Board and the Shanghai Stock Exchange Detailed Rules for Real-time Monitoring of Abnormal Stock Transactions on the STAR Market.

Answer: In order to improve the transparency and standardization of the supervision of abnormal stock transactions under the full implementation of the registration system, the SSE, on the basis of adhering to the continuity, stability and predictability of the regulatory rules, summed up the practical experience of supervision and combined with the opinions and suggestions of market institutions, and formulated the Shanghai Stock Exchange Detailed Rules for Real-time Monitoring of Abnormal Stock Transactions on the Main Board (hereinafter referred to as the Detailed Rules for Monitoring Stocks on the Main Board). The main contents include: First, the qualitative description and quantitative indicators of typical abnormal trading of stocks on the main board are disclosed, and the monitoring standards for 14 typical abnormal trading of stocks in 5 categories are stipulated to further clarify market expectations. The second is to optimize and improve some monitoring indicators, improve the accuracy of supervision, and reduce unnecessary intervention in transactions. The third is to include stocks with severe abnormal fluctuations, stocks under risk alert, and stocks in the delisting period into the focus of monitoring, so that abnormal transactions can be strictly identified, regulatory measures can be strictly adopted, and transaction risks can be prevented.

At the same time, the Shanghai Stock Exchange has revised the Shanghai Stock Exchange Detailed Rules for Real-time Monitoring of Abnormal Stock Transactions on the STAR Market (hereinafter referred to as the Detailed Rules for Monitoring Stocks on the STAR Market) to adapt to the Shanghai Stock Exchange Trading Rules (hereinafter referred to as the Trading Rules) and other high-level rule adjustments, and further improve the monitoring standards, which are basically consistent with the Detailed Rules for Monitoring Stocks on the Main Board. The Detailed Rules for Monitoring Stocks on the Main Board and the Detailed Rules for Monitoring Stocks on the STAR Market are positioned as the lower-level rules to the Trading Rules. If there are no provisions in the Detailed Rules for Monitoring Stocks on the Main Board or the Detailed Rules for Monitoring Stocks on the STAR Market, the Trading Rules and other relevant regulations shall apply.

4. Please introduce the main differences in the issuance and underwriting mechanism for IPOs on the main board under the full implementation of the stock issuance registration system compared with the past mechanism.

Answer: The Implementation Measures on Issuance and Underwriting of Initial Public Offerings of Securities on the Shanghai Stock Exchange in this release applies both to the main board and the STAR Market. In accordance with the direction of market-oriented and rule-of-law reform, and with the characteristics of the existing boards, the SSE has improved the issuance and underwriting system of the main board, inherited and promoted the practical experience of the previous pilot registration-based IPO system, and adjusted and optimized pricing and placement and other institutional arrangements. While the new mechanism enhances the inclusiveness, adaptability, it takes into account factors such as the existing situation, risk prevention and control, protection of the rights and interests of retail investors, and thus has strengthened constraint on the market. Compared with the pre-reform period, the main differences in the issuance and underwriting mechanism for IPOs on the main board are as follows:

The first is the pricing mechanism. It is clarified that the issuance price and scale of new shares are mainly determined through a market-based approach. Enterprises with a small issuance scale will continue the direct pricing and have a reference upper limit for pricing as newly added in the new mechanism. The SSE further improves the mechanism of pricing through inquiry and optimizes mechanisms such as reporting pricing by offline investors, the upper limit of the highest quotation exclusion ratio, quotation information disclosure, pricing reference, and the release of special announcements on investment risks. It is clarified that lottery sales or proportional sales restrictions can be adopted for offline issuance, further increasing the constraint on offline investors' quotations.

The second is subscription and placement. The SSE adjusts the subscription unit for new shares for online investors on the main board from 1,000 shares to 500 shares, same to the STAR Market. It is clarified that when the multiple of online subscription is high, on the basis of ensuring that a large proportion of new shares are issued to online investors, the upper limit of the proportion after moving shares from offline to online is adjusted from 90% to 80% on the main board. According to the difference in the number of shares issued, the new mechanism clarifies the arrangement on the scale of strategic allotment and the number of participating investors.

The third is risk prevention and control. The SSE improves the implementation mechanism of the over-allotment option. The SSE adds a response mechanism for major market changes, allowing issuers and lead underwriters to require offline investors to pay a certain amount of margin, and clarifying that secondary placements are allowed when a large number of investors abandon purchases.

5. On the basis of promoting the "open-door review" in the early stage, how can the SSE further strengthen the openness, transparency and predictability of the review, and strengthen the discipline supervision mechanism?

Answer: The SSE attaches great significance to discipline supervision, and will consciously accept supervision and inspection from the CSRC on the stock issuance, and the supervision of the Disciplinary Inspection and Supervision Team stationed at the CSRC, and will closely cooperate with the on-site supervision of the SSE Working Group of the Disciplinary Inspection and Supervision Team of the CSRC. The SSE will work on discipline construction and business development at the same time, continue to improve restriction and supervision on power in the issuance and listing review, and embed various supervision requirements into the whole process of the reform of stock issuance registration system. The SSE will strengthen supervision and discipline enforcement and accountability, promote “not daring to be corrupt, not being able to be corrupt, and not wanting to be corrupt”, focus on key personnel, key positions and key links to strengthen management and supervision, strictly enforce discipline and accountability for violations of laws and regulations, and ensure the implementation of the stock issuance registration system to run steady and far. At the same time, the SSE will further strengthen the openness, transparency and predictability of review, and enhance the "open-door review".

The first is to strengthen the supervision and check and balance on issuance and listing review. The SSE will further improve the review procedures, optimize the review and decision-making mechanism of the issuance and listing review department, and achieve "clear responsibilities, accountability of every position, hierarchical checks, collective decision-making, and effective checks and balances". The SSE will ensure that the members of the two committees perform their duties independently, and give full play to the independent performance of duties and the role of professional gatekeepers. The SSE will comprehensively sort out the operation process of public power on the issuance review, clarify the positions for exercising public power, integrity risk points and prevention and control measures, and establish a supervision and control mechanism covering the entire process of each link.

The second is to deepen the embedded supervision mechanism of the whole chain. The SSE will enrich supervision methods, focus on key positions and key links in the issuance review power, and carry out full-chain, full-process, and all-round supervision. The SSE will promote the organic integration of discipline inspection supervision with organizational supervision, audit supervision, financial supervision and other types of supervision to form a joint force of supervision. The SSE will actively accept social supervision, regularly carry out return visits, reviews and special research on discipline supervision, and extensively listen to the opinions and suggestions of market players, such as issuers, listed companies, and intermediary agencies, and relevant authorities.

The third is to continue to promote "power under the sun". The SSE will strengthen the disclosure of review standards by issuing business rules or guidelines and market training, etc. The SSE will sort out typical cases, enrich the dynamic content of the review, strengthen policy interpretation, better protect the rights of market players to know, participate, and supervise, and minimize the space for discretion. The SSE will strengthen the disclosure of review information, and make full use of the issuance and listing review website and the issuance and listing review system to disclose the review process, procedures and results.

The fourth is to establish and improve a full-coverage and full-process consultation and communication mechanism. The SSE will revise the guidelines for business consultation and communication, expand IPO consultation and communication to refinancing, mergers and acquisitions, and board transfers, and appropriately increase the number of participants in consultation and communication before application. The SSE will optimize the communication channels before application, during the review and after the review meeting, improve the level of consultation reception, and effectively improve the quality and efficiency of consultation services. It is required that consultation questions shall be answered with clear opinions so as to practically solve the problems. If it is difficult to answer directly, the review concerns and suggestions for improvement should be clarified.

The fifth is to create a good and clean working environment. After an enterprise submits an application for issuance and listing, the SSE will immediately send an initiative letter to the chairman of the board of directors, general manager and secretary of the board of directors of the enterprise to jointly promote the "open-door review" to introduce the necessary procedures for review and provide convenient communication channels. There is no need to ask for entrustment or to find "connectors". The SSE will clarify the discipline of honesty and integrity and related requirements, so as to facilitate issuers to better supervise the review. The SSE will improve the integrity commitment system for issuers, sponsors, and related entities, and require relevant market entities to submit integrity commitment letters when the enterprise submits application. The SSE will work with all parties to create a clean environment for issuance and listing review under the sun, and reduce the "temperature difference" and "gap" with applicants. The SSE will strictly adopt supervision and punishment measures for illegal activities such as violating the requirements for clean and honest work, “hunting” review staff, continue to promote the improvement of the whole industry, and jointly create a clean and upright market environment.

6. Please briefly introduce the arrangements on the transition of relevant rules and business from old to new.

Answer: In order to steadily promote the reform of the full implementation of the stock issuance registration system, the officially released supporting rules provide transition measures for the implementation. The 26 rules shall come into force on the date of release except for the following: (1) From the date of release of the 6 rules on issuance and underwriting, if an enterprise for the initial public offering of securities on the main board has obtained the registration approval and has not yet started the issuance, or if an enterprise has not yet started initial public offering on the STAR Market, or companies listed on the main board or the STAR Market have not yet started issuance, the new rules released shall apply, and the exchange shall perform the issuance and underwriting supervision procedures accordingly. In other cases, issuance and underwriting shall be carried out in accordance with the original rules. (2) 5 rules for trading organization and management including the Trading Rules, Measures for Monitoring Stocks on the Main Board and Measures for Monitoring Stocks on the Science and Technology Innovation Board, Implementation Measures for Margin Trading and Securities Lending Transactions on the Shanghai Stock Exchange, Rules on Securities Lending Transactions of Margin Financing Loan Business on the Shanghai Stock Exchange (Trial) shall come into effect from the first day of listing of the first main board stock issued in accordance with the Rules on Management on Registration of the Initial Public Offering of Stock. (3) The Guide to the Essential Terms of the Risk Disclosure Statement shall come into effect on the date of release. From the first day of issuance of the first main board stock issued in accordance with the Rules on Management on Registration of the Initial Public Offering of Stock, ordinary investors who newly open an account shall sign the main board investment risk disclosure statement before participating in the purchase and trading of stocks on the main board for the first time.

In order to achieve orderly handover and smooth transition of the issuance and listing review work, the Shanghai Stock Exchange issued the Notice on the Transition Arrangements for the Review Work Related to the Full Implementation of the Stock Issuance Registration System on February 1. According to this notice, the Shanghai Stock Exchange will receive applications from companies under review for IPO, refinancing, and mergers and acquisitions on the main board from February 20 to March 3, 2023, and continue the review in accordance with the review and acceptance order of the China Securities Regulatory Commission. From March 4, 2023, applications from new applicants for the main board will be accepted. The acceptance and review of applications for the STAR Market is progressing normally, and companies under review should submit special explanations and verification opinions in compliance with the new regulations before March 10, 2023, and submit updated application documents for the next response to inquiry or financial report update.