Yinfa No. 45 [2024], Notice of the People’s Bank of China on Over-the- Counter Trading Services for the Interbank Bond Market
The People’s Bank of China (PBOC) Shanghai Head Office and PBOC branches in all provinces, autonomous regions, municipalities directly under the Central Government, and cities under separate state planning, China Foreign Exchange Trade System (National Interbank Funding Center), Shanghai Clearing House, National Association of Financial Market Institutional Investors, China Central Depository & Clearing Co., Ltd., and all OTC service providers:
To promote better-regulated over-the-counter business in the interbank bond market, and pursuant to the Measures for the Administration of Bond Transactions in the National Interbank Bond Market (PBOC Order No. 2 [2000]), Measures for the Administration of Registration, Custody, and Settlement of Bonds in the Interbank Bond Market (PBOC Order No. 1 [2009]), Measures for the Administration of the Over-the-Counter Trading Services for the National Interbank Bond Market (PBOC Announcement No. 2 [2016]), and the Announcement on Further Facilitating Investment in China’s Bond Market by Overseas Institutional Investors (Announcement No. 4 [2022] of the People’s Bank of China, the China Securities Regulatory Commission and the State Administration of Foreign Exchange), this Notice is hereby given on matters concerning the participation of investors in the interbank bond market through OTC service providers.
| Article 1
| For the purpose of this Notice, “investors” refer to the investors specified in
Article 9 of the Measures for the Administration of the Over-the-Counter
Trading Services for the National Interbank Bond Market, which include
individual investors, enterprises, and financial institutions |
| Article 2
| For the purpose of this Notice, “OTC service provider” refers to a financial
institution meeting the criteria under Article 4 of the Measures for the
Administration of the Over-the-Counter Trading Services for the National
Interbank Bond Market.
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| Article 3
| Investors may through OTC service providers invest in such bond products
offered in the interbank bond market as central government bonds, local
government bonds, financial bonds, and corporate debenture bonds. Investors
shall meet the suitability requirements under the Measures for the
Administration of the Over-the-Counter Trading Services for the National
Interbank Bond Market. Bond products that are already being traded in the interbank bond market may be invested in and traded through OTC transactions without the approval of the issue |
| Article 4
| An OTC service provider shall open bond accounts for investors and handle
such processes as bond registration, custody, and settlement. Any investor that
has already opened a bond account through the depository and clearing institution for the interbank bond market may open a bond account through an
OTC service provider without the approval of People’s Bank of China. Any
overseas investor granted access to the interbank bond market may open a
bond account through an OTC service provider or a Mainland custodian bank. |
| Article 5
| An OTC service provider may provide quotation and trading services to
investors independently or in collaboration with a market maker of the
interbank bond market. OTC service providers may, through such services as two-way quotes and requests for quote, offer liquidity support to bonds purchased or sold by investors through the |
| Article 6 | The depository and clearing institution for the interbank bond market shall
adequately negotiate with issuers and OTC service providers and make
effective arrangements for the transfer of funds regarding payment of bond
interest and principal to ensure the interest and principal on OTC bonds is paid
through a smooth process and timely received by investors. An OTC service
provider shall promptly notify investors of any special circumstances that arise.
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| Article 7
| Any OTC service provider that engages in OTC bond repo, bond lending, and
derivatives transactions with a financial institution may execute a
supplemental agreement with the financial institution supplementing the
uniform master agreement for the interbank bond market, or directly enter into
a one-to-one bilateral agreement with the financial institution. Any OTC service provider that offers OTC bond services to a financial institution shall have top bond investment and trading volume in the interbank bond market and sound internal controls as well as strong registration and custody, settlement, and funds clearing capabilities for financial assets |
| Article 8
| An OTC service provider shall establish OTC business rules and an
appropriate investor suitability regime to provide investors with bond and
trading products that are commensurate with their risk-bearing capacity. |
| Article 9 | OTC service providers shall strengthen the internal controls and IT systems for
OTC transactions to ensure their trading services are fully traceable. Each
OTC service provider shall establish rigorous operating procedures for the
trading, custody and settlement, and information security of OTC bonds and
prevent the risks associated with OTC businesses. An OTC service provider shall indicate which risks are to be borne by itself and which are to be borne by investors, make adequate risk disclosures, improve its dispute resolution protocols, and safeguard the legitimate rights and interests of investors. |
| Article 10 | Each OTC service provider shall, in accordance with the regulations of the
People’s Bank of China, submit the detailed trading, custody, and settlement data on investors’ OTC transactions to the National Interbank Funding Center
in a timely manner, who shall in turn share the relevant information with the
depository and clearing institution for the interbank bond market with a copy
sent to the National Association of Financial Market Institutional Investors. The National Interbank Funding Center and the depository and clearing institution for the interbank bond market shall each update their OTC trading and settlement rules in accordance with this Notice, clarify their data submission and settlement requirements, and submit monthly report to the People’s Bank of China on investors’ OTC transactions. |
| Article 11
| The People’s Bank of China reserves the right to interpret this Notice. Matters
not addressed in this Notice are governed by the Measures for the
Administration of the Over-the-Counter Trading Services for the National
Interbank Bond Market. To the extent of any conflict between this Notice and
other regulations of the People’s Bank of China on OTC businesses, the
provisions of this Notice shall prevail.
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| Article 12
| This Notice takes effect as of May 1, 2024.
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