Disclosure Requirements - China - China Interbank Bond Market

17.10.2016

Disclosure Category: 2

Clearstream Banking S.A (CBL) may be required, under PBOC SHH Notice [2016] No.2, to disclose, upon request to relevant Chinese regulatory body or government agency on the China Interbank Bond Market (CIBM), the identity and holdings of customers.

Investors holding CIBM securities are required to report if they exceed the set thresholds and/or have conducted trades under certain conditions.

Background and legal basis

On 26 May 2015, the People’s Bank of China (PBOC) released a notice (PBOC Notice [2015] No. 9) (the “Notice”) regarding the adjustment of the administrative policy for bond trading in the interbank bond market.

Further to the release of the Notice by PBOC, CFETS has also released the “National Interbank Funding Center Bond Trading and Circulation Rules” and “Trading Information Disclosure Guide” which provides more details.

Disclosure obligations

Monthly Trading Information Disclosure

Investors is required to provide information disclosure for each month’s trades that fall under the below circumstances to CFETS via the Trading Information Disclosure Form within the 5 working day of the following month.

  • An investor conducts bond trading with its parent company or other subsidiaries (branches) of its parent company, including:
    • Both trading parties are independent legal entities, while one trading party is the actual controller of the other based on investment shares, holdings or agreement;
    • Two trading parties are independent legal entities (or branches), while both trading parties are actually controlled by the same parent company (or headquarter)
    • One trading party is the headquarter (or branch)of the other trading party;
  • An asset manager conducts bond trading between its proprietary account and other account under its management, or conducts trading between two accounts which are both under its management;
    • One trading party is a financial institutional CFETS member, the counterparty is its fund manager or asset manager and is a non-legal entity’s CFETS member;
    • Both trading parties are non-legal entity’s CFETS members and have the same fund manager or asset manager;

Information Disclosure for Substantial Transaction

A single REPO transaction with amount exceeding RMB 1 billion (transactions of same tenor traded with the same counterparty on the same day shall be calculated aggregately) or other single subject with amount exceeding RMB 200 million (transactions on the same bond traded by the same counterparty on the same day shall be calculated aggregately) shall be reported by the trading parties or asset managers to CFETS in writing within 5 business days after trading. The written report could be a free format self-explanation letter, which shall include the transaction details, reasons for the transaction, pricing method and potential impact.

Concentration Disclosure

If a single investor holds over 30% of the bond’s public issuance quantity, investor should report and disclose the required information through submitting the Trading Information Disclosure Form to CFETS within 5 working days.

Sanctions

Failure to disclose or comply with the required disclosures may result in the below measures by CFETS and the incident will be reported to PBOC.

  • Verbal Warning
  • Written Warning
  • Meeting interview
  • Make a Public Criticising Announcement
  • Stop the trading (period subject to CFETS)