What’s new: Stock investors on the Chinese mainland will have to set aside more in collateral when they borrow securities to sell, according to new rules announced by the China Securities Regulatory Commission on Saturday.
The tightened rules on securities borrowing — an important tool for short selling — raised the minimum margin ratio for borrowers to 80% from 50%. For privately offered securities investment funds, the minimum ratio will be 100%. These changes go into effect on Oct. 30.
The rules added curbs to securities lending by strategic investors of listed companies, including senior managers and other core employees. These measures took effect on Monday.
The background: Early this year, financial regulators in China permitted securities lending for newly listed stocks on the bourses in Shanghai and Shenzhen, as part of an overhaul to create a more market-oriented IPO system.
But as the stock market underperforms, some investors have blamed market volatility on people speculating with securities lending, especially when strategic investors of newly listed companies lend large quantities of shares within a lock-up period.
China’s benchmark CSI 300 Index has dropped more than 6% this year, despite government efforts to prop up the market.
Read more Caixin Explains: Why China’s Efforts to Juice Stocks Typically Don’t Last
Contact reporter Zhang Yukun (yukunzhang@caixin.com) and editor Bertrand Teo (bertrandteo@caixin.com)
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