Two Departments Issue Documents to Promote Bond Market Infrastructure Connectivity
"Efficient connection" between the two major bond markets
(News reporter Cheng Jie) Recently, the People's Bank of China and the China Securities Regulatory Commission jointly issued the "People's Bank of China China Securities Regulatory Commission Announcement ([2020] No. 7)", agreeing to the inter-bank bond market and exchange bond market related infrastructure Institutions carry out interconnected cooperation. This move aims to implement the requirements of the National Financial Work Conference on promoting the interconnection of financial infrastructure, further facilitate bond investors, and promote the high-quality development of my country's bond market.
According to reports, interconnection refers to a mechanism arrangement in which the qualified investors in the inter-bank bond market and the exchange bond market are connected through two market-related infrastructure institutions to buy and sell tradable bonds in the two markets.
The interconnection of the two market infrastructures is specifically divided into two parts: trading front-end connection and escrow settlement back-end connection. On the one hand, the foreign exchange trading center establishes an efficient system connection with the trading platform of the Shanghai and Shenzhen stock exchanges to provide trading services; on the other hand, the Central Clearing Company, Shanghai Clearing House and China Clearing each open nominal holder accounts to establish an efficient system Connect to support qualified investors to achieve "one-point access" transaction settlement.
The announcement made it clear that the People's Bank of China and the China Securities Regulatory Commission will strengthen supervision cooperation and coordination, and jointly supervise and manage the bond issuance, registration, trading, custody, liquidation, and settlement through the interconnection.
Infrastructures such as inter-bank bond market and exchange bond market bond registration and settlement institutions can jointly provide services such as bond issuance, registration and custody, clearing and settlement, and interest payment for issuers and investors.
Nominal holder accounts shall be opened between the bond registration and settlement institutions of the inter-bank bond market and between the bond registration and settlement institutions of the inter-bank bond market and the exchange bond market to record the balance of all nominally held bonds.
According to the announcement, while the interconnection between the inter-bank bond market and the exchange bond market is realized, China Development Bank and policy banks, state-owned commercial banks, joint-stock commercial banks, city commercial banks, foreign banks in China, and other banks listed in China can Choose to participate in spot bond agreement transactions on the exchange bond market through the interconnection mechanism or through direct account opening.
It is understood that since 1997, my country's bond market has formed a unified and layered market system consisting of three sub-markets: the inter-bank market, the exchange market, and the commercial bank counter market. Among them, the inter-bank market involving institutional investors is the main trading venue of my country's bond market. In recent years, bond custody and transaction volume accounted for about 90% of the entire market. From a regulatory perspective, the bond market is a multi-agent regulatory framework.
In recent years, in order to establish a bond market with unified management and coordinated development, a series of measures by relevant departments have been continuously implemented. For example, in August 2019, the CSRC, the People's Bank of China, and the China Banking and Insurance Regulatory Commission jointly issued a notice to expand the scope of banks participating in spot bond transactions in the exchange bond market. In December 2019, the People's Bank of China, together with the Development and Reform Commission and the China Securities Regulatory Commission, issued the "Administrative Measures on Information Disclosure of Corporate Credit Bonds (Draft for Comment)", aiming to unify the standards for corporate credit bonds. At the beginning of March this year, six departments including the People's Bank of China and the Development and Reform Commission jointly issued the "Working Plan for the Overall Supervision of Financial Infrastructure".
The central bank said recently that the interconnection of the bond market infrastructure is conducive to effectively facilitating the issuance and trading of bonds across markets, promoting the free flow of capital and other elements, forming a unified market and a unified price, and laying a solid foundation for the smooth transmission of monetary policy and the effective implementation of macro-control It is also conducive to improving the service level and efficiency of China’s bond market infrastructure, promoting the construction of a customer-centric bond market infrastructure service system with moderate competition, and better serving the real economy.
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The bond market balance of 108 trillion yuan ranks second in the world
In the past few years, my country's bond market has developed rapidly. Both the annual issuance amount and the custody balance have shown steady growth.
In 2015, my country's bond market issued various bonds of 22.3 trillion yuan throughout the year; in 2019, the bond market issued various bonds of 45.3 trillion yuan. With the continuous growth of the annual issuance of various types of bonds, the custody balance of my country's bond market has also increased year by year. At the end of 2015, the bond market custody balance was 47.9 trillion yuan; at the end of 2019, the bond market custody balance increased to 99.1 trillion yuan.
At the same time, the variety of my country's bond market is also constantly enriched, and its products cover many categories such as government bonds, local bonds, financial bonds, corporate credit bonds, interbank certificates of deposit, and panda bonds. Among the various types of bonds, there have been many innovative bonds in recent years, such as special poverty alleviation bonds, green bonds, small and micro financial bonds, and "double innovation" bonds. In this year's epidemic prevention and control war, many types of epidemic prevention and control theme bonds have been issued one after another.
On July 3 this year, data released by the central bank's official public account showed that the current balance of China's bond market is 108 trillion yuan, ranking second in the world. As of the end of June 2020, a total of nearly 900 foreign legal entities have entered the inter-bank bond market, covering more than 60 countries and regions around the world. The scale of holding RMB bonds is about 2.6 trillion yuan. Since 2017, the annual growth rate has been nearly 40%.
At present, the scale of debt held by foreign institutions accounts for 2.4% of my country's total bonds, and the scale of held government bonds accounts for 9%.
Text/Reporter Cheng Jie