Shenzhen Stock Exchange, Implementing Rules for Exchange Traded Funds Business

Promulgated: February 13 2006
Effective: as of date of promulgation
Interpreting authority: Shenzhen Stock Exchange (Stock Exchange)
Applicability: The term 'exchange traded funds' (ETFs) refers to open-ended funds raised in accordance with the law that aims to track specific securities indexes, whose fund shares are subscribed and redeemed through portfolios, and that are listed and traded on the Stock Exchange
(Article 2). These Rules apply to the sale, subscription, redemption and trading of fund shares of ETFs (Fund Shares) on the Stock Exchange. Where matters are not covered by these Rules, other provisions of the stock exchange shall prevail (Article 3).

Main contents: Investors may subscribe Fund Shares with securities or cash (Article 8). Investors subscribing or redeeming fund shares through the Stock Exchange shall do so through securities agencies in minimum subscription and redemption units as specified in the fund contract or in integral multiples (Articles 12 and 14). Investors subscribing for Fund Shares shall have the corresponding portfolio securities and cash alternatives in full. Investors redeeming Fund Shares shall have the corresponding Fund Shares in full (Article 17). For distribution of rights and interests of ETFs, the ex-rights (or ex-dividend) procedures shall be carried out on the record date (Article 24). Before the market opens, fund managers shall provide the subscription and redemption list for the fund to the Stock Exchange and securities depository and clearing institution, and the same shall be announced through information dissemination channels designated by the Stock Exchange (Article 26).
Related legislation: PRC Securities Investment Fund Law, Oct 28 2003, CLP 2003 No.10 p.43