In order to comply with the requirements of the Securities Law, standardize regulatory practices, and stabilize market expectations, the China Securities Regulatory Commission (CSRC) has drafted the Provisions on Improving the Regulation of Short-swing Trading by Specific Shareholders (Draft for Comments) (hereinafter referred to as the Provisions) and is now soliciting public opinions. The Shanghai Stock Exchange (SSE) will earnestly carry out the research and formulation of relevant supporting rules in accordance with the requirements of the CSRC.

Article 44 of the Securities Law establishes the principles regarding short-swing trading by specific shareholders. However, in practice, there have been questions from market participants regarding the applicable scope of specific shareholders, securities involved, and standards for calculating profits from short-swing trading.

The Provisions formulate rules from mature and effective regulatory practices to timely address market concerns, which will help standardize the regulation of short-swing trading by specific investors and stabilize investor expectations. Additionally, the Provisions clarify the standards for the application of short-swing trading rules to both domestic and foreign specific investors, and explicitly list exemptions. This will improve the convenience of trading, further enhance the attractiveness of the A-share market, and contribute to the opening-up of the capital market.

Under the guidance of the CSRC, the SSE has always adhered to market-oriented and law-based approaches in the regulation of short-swing trading by specific investors, taking into account both fairness and efficiency. On the one hand, it strictly regulates short-swing trading by specific investors in accordance with Article 44 of the Securities Law, effectively performing the function of preventing insider trading. On the other hand, the SSE actively supports market participants in legally and compliantly participating in the A-share market. By conducting in-depth research on the application of short-swing trading rules to new types of businesses, it promotes the smooth development of various capital market activities.

Moving forward, guided by the CSRC, the SSE will earnestly carry out the research and formulation of relevant supporting rules for short-swing trading by specific investors. It will simultaneously emphasize compliance and development, make exemptions for pre-designated situations from the application of short-swing trading rules in accordance with the law, facilitate participation in the A-share market in a compliant manner, and take regulatory action on violations in accordance with rules. This will help the rules of short-swing trading by specific investors effectively perform the function of promoting the stable and healthy development of the capital market.