Shanghai Stock Exchange, Implementing Measures for Securities Lending Transactions of the Re-lending Business (Trial Implementation)

A Securities Lending Transaction may be a fixed price transaction, negotiated transaction or bid-based transaction (Article 22).

A Lender's or a Borrower's applied-for quantity shall be 100 shares or an integral multiple thereof and the applied-for quantity on any one occasion may not be less than 10,000 shares. The applied-for quantity lent by a Lender on any one occasion may not be more than 1 million shares. The maximum quantity applied for by a Borrower on any one occasion may not be more than 100 million shares (Article 39 & Article 40).

With respect to non-specified applications, the Shanghai Stock Exchange brokers transactions in accordance with the following principles:

(1) if the total applied-for quantity lent by all Lenders for each security under each term level does not exceed the applied-for quantity borrowed by Borrowers, transactions shall be matched with Borrowers in the order of the times of the Lenders' lending application instructions;

(2) if the total applied-for quantity lent by all Lenders for each security under each term level is greater than the applied-for quantity borrowed by Borrowers, the transaction quantities for all Lenders shall be determined pro rata and transactions matched with each Borrower respectively. If, after completion of the transactions pro rata, there remains a portion of the quantities applied for by the Borrowers for which transactions have not been completed, transactions shall be matched with Borrowers in order from large to small of the applied-for quantity lent by the Lenders, and if lent quantities applied for are identical, transactions shall be matched with Borrowers in the order of the application times, until such time as transactions have been completed for all of the Borrowers' applications.

When determining the quantity of transactions pro rata, the minimum transaction unit shall be 100 shares (Article 42).

With respect to specified applications, the Shanghai Stock Exchange shall broker transactions in accordance with the one-to-one correspondence principle. When each of the factors, such as the parties' specified number, term level, securities code, quantity of securities, fee rate, etc., are consistent, the transaction shall be completed. If any item does not match, the transaction shall not be completed (Article 43).

If a Borrower fails to punctually return and pay, or fails to fully return and pay, the relevant securities and funds, it shall pay liquidated damages to the Lender at the rate of 0.05% of the outstanding debt per day (Article 45).

If any of the following circumstances arises between the time a Borrower borrows securities and returns the same, it shall provide equity compensation to the Lender:

(1) the securities issuer distributes investment returns;

(2) the securities issuer makes a rights offer or allots securities without consideration to securities holders; or

(3) the securities issuer offers securities with respect to which securities holders have a preemptive right of subscription (Article 52).

Related legislation: Trial Measures for the Regulation of the Re-lending Business, Oct 26 2011, CLP 2011 No.10 p.29; Guiding Opinion on Pilot Engagement in Margin Trading and Short Sale of Securities by Securities Companies, Jan 22 2010, CLP 2010 No.2 p.32; Rules on the Re-lending Business (Trial Implementation), Aug 27 2012, CLP 2012 No.7 p.33; Implementing Rules for the Administration of the Margins of the Re-lending Business (Trial Implementation), Aug 27 2012, CLP 2012 No.7 p.34; and Shenzhen Stock Exchange, Implementing Measures for Securities Lending of the Re-lending Business (Trial Implementation), Aug 27 2012, CLP 2012 No.7 p.37