People's Bank of China, Administration of Bond Forward Transactions in the National Inter-bank Bond Market Provisions

Promulgated: May 11 2005
Effective: June 15 2005
Interpreting authority: People's Bank of China
Applicability: The term 'bond forward transaction' (hereafter, Forward Transaction) refers to activities whereby both parties to a transaction agree to sell and purchase the concerned bonds at the agreed price and of the agreed amount on a specified future date (Article 2). Types of bonds for Forward Transactions shall be central government bonds, central bank bonds, financial bonds and other types of bonds approved by the People's Bank of China that have been traded in cash bond transactions in the national inter-bank bond market (Article 3).

Main contents: Market participants of Forward Transactions shall be institutional investors that have entered the national inter-bank bond market (Article 5). The period between the transaction date and settlement date (including the transaction date but excluding the settlement date) of Forward Transactions shall be determined by both parties to the transaction, but the maximum shall not exceed 365 days (Article 11). The total sale and purchase balances of Forward Transactions of a single bond by a market participant (fund assets used by fund management companies for Forward Transactions are deemed to be single funds) shall respectively not exceed the trading volume of that particular bond by 20%, and the total sale balance of Forward Transactions shall not exceed the total balance of the market participant's own available bonds by 200% (Article 15). Among market participants, the total net purchase balance of Forward Transactions of a particular fund may not exceed the net asset value of the fund by 100%. The total net purchase balance of Forward Transactions of any branch or sub-branch of any foreign-invested financial institution in China may not exceed its working capital in renminbi by 100%. The total net purchase balance of Forward Transactions of other institutions may not exceed their paid-in capital funds or net assets by 100% (Article 16).
Related legislation: PRC People's Bank of China Law (Revised), Dec 27 2003, CLP 2004 No.1 p4