According to the China Securities Regulatory Commission (CSRC), the country’s leading securities regulator, stocks traded on the New Beijing Stock Exchange (ESB) will not be allowed to rise or fall by more than 30% during a single trading day.
New listings will not be subject to any cap on price changes on their first trading day, and the daily price limit will only apply from their second trading day, a The CSRC spokesperson was announced on Friday (link in Chinese), when the commission released a set of draft regulations on the supervision of the new stock exchange.
The draft regulation (link in Chinese), which are open for public comment until Oct. 3, stipulate rules covering listing requirements for IPO applicants, the exchange’s responsibilities for overseeing stock issuers and the governance structure of the exchange.
The project came a day after Chinese President Xi Jinping announced plans to launch BSE, which should become a platform for innovative small and medium-sized enterprises (SMEs) to raise funds directly from investors. The stock exchange will be the third largest on the Chinese mainland, after the Shanghai and Shenzhen markets.
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In an earlier statement released Thursday, the CSRC said that BSE test a registration-based IPO system (link in Chinese), which is designed to make the listing process more transparent and market-oriented than it is in the old approval-based IPO system. The registration-based system was adopted by the Shanghai STAR Market in mid-2019 and by the Shenzhen ChiNext Board of Directors last year.
Under the draft regulations released on Friday, the ESB is required to set up an independent valuation service and a listing committee to review IPO application documents and give opinions before sending out notices. qualified to the CSRC for consideration. The exchange is also encouraged to set up an industry advisory committee to provide professional advice and suggestions to the exchange on reviewing IPO applications.
In addition, the ESB will adopt a market-based pricing mechanism and introduce a flexible issuance mechanism to reduce the costs of financing SMEs, according to the project. The draft regulation also aims to establish rating standards adapted to innovative SMEs. IPO applicants must have traded for at least 12 months in the “innovative level” category of the country’s OTC equity trading platform, the National Equities Exchange and Quotations (NEEQ), also known as the New Third Board, the draft says.
Founded in 2012 in Beijing, NEEQ was designed as an incubator for SMEs to grow, become profitable and improve their corporate governance, then graduate to be listed on the Shanghai or Shenzhen Stock Exchange. Negotiation on the NEEQ is currently divided into three categories: a “selected third party” which includes high quality companies that have good profitability or strong innovation capacities; a “level of innovation” for well-managed companies that are not good enough to enter the “selected level”; and a “base level” for others.
The ESB will become a listing and trading platform for companies of the “selected level”, while those of the “innovative level” will be potential candidates for the stock exchange listing in the future, the CSRC announced on Thursday.
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