The Shanghai Stock Exchange (SSE) will continue its efforts in innovation in the second half by expanding the authorization and intensifying the development of ETF on the index fund market to launch cross-market and cross-border ETF products, according to SSE President Zhang Yujun at the "2010 Finance and Investment Summit" sponsored by the Shanghai Securities News on June 18. Zhang also pointed out in his speech that innovation is the soul of financial market development. The SSE carried out its innovation efforts in the first half of the year under the principles of controllable risk, orderly advancement as well as safety and stability.
Zhang said that this year, China's capital market persistently upholds the innovation as the main orientation and goal of financial development. Specifically, the SSE drives its business innovation in five aspects including index fund and margin trading and securities lending.
First of all, the fund market saw a rapid growth from January to June. The scale, depth and scope of the SSE index fund parameters have all been expanded. According to preliminary prediction, a total of three index funds will be listed and traded on the SSE in the first half, namely SSE Mega-cap ETF, SSE 180 Value ETF and SSE Mid-cap ETF. Generally speaking, by May 31, the number of ETFs listed and traded on the SSE had increased to seven, with five to six ETF products to be launched in the second half. In addition, thanks to the stable introduction of stock index futures, by the end of May, the total ETF shares had surged by 61.92% compared with that in the end of 2009, and the 180ETF shares set a record high in 2010, both of which indicated that the product innovation improved the market liquidity.
Zhang noted that as ETF boasts a bright market prospect, the SSE will expand the authorization and intensify the development of ETF on the index fund market in the second half of the year with a view to launching cross-market and cross-border ETF products. According to him, the SSE is now accelerating the design of diversified ETFs and improving the differentials of ETF products. The development of SHSE-SZSE300 ETF, cross-border ETF and bond ETF is speeding up while the research and design of gold ETF and 130/30ETF are well under way. Moreover, the development of REIT and asset securitization products is also under research.
Secondly, the launch of margin trading and securities lending richened the transaction mode. Zhang said, from the launch of pilot margin trading and securities lending on March 31 to the end of May, a total of 1,716 credit-backed securities accounts had been opened on the Shanghai market, with a daily average of 37 accounts. The turnover of margin trading and securities lending on the Shanghai market had totaled RMB1.955 billion, accounting for 64.1% of the total of the SSE and the Shenzhen Stock Exchange (SZSE). Since its introduction, more investors have participated in it, with active trading activities and increasing balance of margin trading and securities lending. At present, the 2nd batch of pilot dealers is making preparations for the system and technology. The SSE will strive to make a great progress in margin trading and securities lending in the second half by launching the 2nd round of pilot.
Thirdly, trading mechanism and system were improved continuously. The first half of 2010 saw the SSE's lift of trading time limit on block trading from the original half an hour to the whole day. Meanwhile, the pilot of quote repurchase realized a significant breakthrough in innovation pilot of securities companies. Since the start of the pilot, a total of 28,592 transactions have been made, with the total amount of RMB34.85 billion and the undue balance of RMB450 million. 5,606 investors were recognized as qualified investors, with 1,284 qualified investors participating in the repurchase. In the next stage, the SSE will further perfect the qualified investor system and block trading system by such ways as providing the after-hour fixed price trading mode, adding the anonymous trading mode and enriching the non-guarantee settlement method.
Fourthly, the innovation of bond market was strengthened to deepen the reform on the bond market. The SSE expanded the listing scale of such major varieties as corporate bonds and enterprise bonds. It is learnt that from January to May, over 30 bonds had been listed on the SSE. At the same time, the SSE integrated its trading platform to better satisfy the trading needs of investors. Besides, it also adjusted the varieties of repurchase products by lifting the repurchase time limit, which gave birth to the repurchase products with the term from one day to 365 days. Next, the SSE will take the advantage of the introduction of commercial banks to boost the development of bond market and drive the coordination and connection of bond markets.
Fifthly, the launch of stock index futures promoted the innovation of supervision method. To be specific, after the launch of stock index futures, the SSE perfected the function of its monitoring and supervision system and strengthened the monitoring over the constituents of CSI 300 Index. Furthermore, to enhance the timely discovery and disposal of abnormal trading, the SSE, together with the China Financial Futures Exchange, established the "green channel" system for trading supervision whereby the designated personnel of the both parties can timely communicate with each other by phone the trading situation in order to discover and control risk in case any of them detects abnormal trading.
Looking forward into the second half of 2010, Zhang said that the SSE will continue its innovative efforts to unswervingly perfect the function of the capital market and serve the development of the real economy by way of market innovation. He stressed that special attention should be paid to the following issues in the process of innovation: first, importance should be attached to risk control for a smooth and orderly innovation; second, investor education should be highlighted in the process of innovation; third, a sound legal environment should be created to provide better legal support to innovative business; fourth, greater efforts should be made to foster the innovative talents and strengthen the research and development of innovative products.