The Shanghai Stock Exchange (SSE) and China Securities Depository & Clearing Corporation (CSDCC) have released information about the trading and settlement of the pre-issuance of treasury bonds.
This refers to the trading between buyer and seller in a specified period before the official bidding and issuing of treasury bonds, with settlement at the set price after the official bidding.
The seven-year treasury bond that will be issued in mid-October is the first instrument to which these rules will apply.
The process will help to improve the price-finding function of the treasury bonds market. Also, underwriters of treasury bonds can sell treasury bonds in advance, which will help them to confirm the subscription intentions of clients.
Market feedback is reflected in the new business measures released at the end of last week, covering auction trading, net settlement, and T+0 intraday trading. The intention is to establish a pre-issuance market with better liquidity and price-finding functions for benchmark treasury bonds.
According to the SSE, since the pre-issuance of treasury bonds uses margin trading, it possesses characteristics of leveraged trading and therefore has higher risks than the spot trading of general treasury bonds. As a result, participants in the new pre-issuance business are restricted to securities companies, banks, fund management companies, insurance companies and certain other financial institutions and professional investors.
market participants can get access to the exchange’s trading system to engage
in the pre-issuance of treasury bonds, either through the system interface or
through the client site. Before undertaking trading of the pre-issuance of
treasury bonds, each participant has to have a margin account at the Shanghai
Branch of CSDCC. Some market quote software providers have integrated the
trading quotations of pre-issuance treasury bonds into their quotation software