China to Connect Interbank, Exchange Trade Bond Markets

Source: Regulation Asia Editors, Regulation Asia 2020-07-20

Qualified investors will be able to buy and sell tradable bonds in either of the two markets through a single nominee account, subject to meeting investor suitability requirements.

The PBOC (People’s Bank of China) and CSRC (China Securities Regulatory Commission) have agreed to cooperate to connect the interbank and exchange bond markets.

China’s interbank bond market is supervised by the PBOC and dominated primarily by banks, whereas the smaller exchange bond market is regulated by the CSRC, with brokerage firms, investment funds and individuals participating in trading.

Interconnecting the infrastructures of the two markets will facilitate cross-market issuance and trading of bonds, promote the free flow of capital, and ultimately form a unified market and unified pricing, the regulators said in a joint statement. It will also facilitate smooth transmission of monetary policy and macro economic management, while also improving the service level and efficiency of China’s bond market infrastructures.

Under the arrangement, qualified investors will be able to buy and sell tradable bonds in either of the two markets through either market’s electronic trading platform, subject to meeting investor suitability requirements.

Bond registration, depository and settlement institutions of both markets will be able to jointly provide issuers and investors with bond issuance, registration and custody, clearing and settlement, interest payment and other services – whereby investors will be able to view the balance of all nominal bonds they hold through a single nominee account.

Under the arrangement, the PBOC and CSRC will strengthen supervision cooperation and coordination, and jointly supervise and manage bond issuance, registration, trading, custody, clearing, and settlement.

People’s Bank of China

China Securities Regulatory Commission

China to Connect Interbank, Exchange Trade Bond Markets

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