New regulations for A-shares! Starting today, they are officially implemented! Regarding short-term trading

To implement the short-term trading supervision and regulatory system under the Securities Law and to facilitate the entry of medium- and long-term capital into the market, the China Securities Regulatory Commission (CSRC) has formulated and issued the “Several Provisions on Regulation of Short-Term Trading” (hereinafter referred to as the “Provisions”), which will come into force on April 7, 2026.

Industry insiders believe that, for ordinary investors, the new rules mean the market’s “game rules” will be fairer and more transparent. Those who attempt to use gray areas for insider trading and short-term speculation will be subject to stricter constraints.

Further clarify short-term trading regulatory arrangements for major shareholders and others

Based on a systematic review of domestic and overseas legislation, judicial practices, and regulatory practices, the “Provisions” respond to market concerns and further clarify regulatory arrangements related to short-term trading by major shareholders and directors, supervisors, and senior executives. The “Provisions” contain twelve articles. The main content includes multiple aspects.

First, it clarifies the scope of applicable entities and types of securities. Regarding short-term trading entities, the regulation covers cases where the person holds the identities of a major shareholder and a director, supervisor, or senior executive both at the time of buying and selling, as well as cases where the person does not have a specific identity at the time of buying but does have such an identity at the time of selling. The scope of securities involved includes stock and depository receipts, exchangeable corporate bonds (hereinafter “exchangeable bonds”), convertible bonds, and other equity-type securities.

Second, it clarifies the standards for identifying and calculating shareholding and trading time points. In light of regulatory practice, it specifies a series of identification and calculation standards, including:

First, for the time points of buying and selling, the securities transfer registration date is the reference.

Second, the shareholding ratio of major shareholders above 5% is calculated by combining the shares that are issued or listed and publicly transferred within and outside the country by the same listed company or the same NEEQ (New Third Board) listed company.

Third, shareholding above 5% by Hong Kong Securities Clearing Company Limited as a nominee holder under the mutual market access mechanism is not recognized as being held by major shareholders.

Fourth, the securities involved in short-term trading are not subject to cross-product combination calculation.

Fifth, the same overseas investor shall combine the quantities of securities it holds through qualified overseas institutional investors, RMB qualified overseas institutional investors, foreign strategic investors, and the Shanghai-Hong Kong/Shenzhen-Hong Kong Stock Connect mechanisms for calculation.

Next, it specifies exempt application scenarios. It clarifies 13 exemption scenarios, mainly covering three categories:

First, according to product or business system design, where the market has clear expectations for relevant business segments and support is needed for business development, such as conversion of preferred shares, conversion, redemption, and repurchase of convertible bonds, conversion and redemption of exchangeable bonds, ETF subscription, subscriptions and redemptions, the grant, registration, and exercise related to equity incentives, and market-making businesses, etc.

Second, shareholding changes caused by objective non-trading factors, such as judicial compulsory enforcement, inheritance, donations, gratuitous transfers of state-owned shares, etc.

Third, trading actions conducted in accordance with relevant regulatory provisions and in compliance with the law and regulations to respond to major financial risks and to maintain financial stability, such as fraudulent issuance with orders for repurchase, or orders to buy back for illegal or noncompliant reduction of holdings, etc. To prevent the use of exemption scenarios to circumvent supervision, the “Provisions” specify that if the above actions involve seeking illegal benefits by taking advantage of information advantages, they will not be exempted.

Finally, it clarifies how institutions are to apply the rules. For the three types of cases in which professional institutions manage the business and open securities accounts separately by product or portfolio, the shareholding will be calculated separately under the one-account system for each product or portfolio:

First, domestic public funds, the national social security fund, basic pension insurance funds, annuity funds, insurance funds, etc.

Second, collective private asset management products managed by securities and futures fund management institutions, as well as private securities investment funds that meet regulatory requirements.

Third, overseas public funds that participate in domestic securities trading through qualified overseas institutional investors and the Shanghai-Hong Kong Stock Connect mechanism, and that report the northbound shareholding information for the relevant products as required. To prevent the use of this measure to circumvent supervision, the “Provisions” clarify that for the above products or portfolios, if they cannot independently operate in a standardized manner or if there are conflicts of interest, illegal or noncompliant activities, etc. during the trading process, the quantity of securities held will not be calculated separately.

Stock lending under securities lending/borrowing (securities lending and repurchase) is not an exemption scenario

Article 6 of the “Provisions” adopts the form of an “exemption list,” enumerating 13 scenarios that do not constitute short-term trading, mainly divided into three major categories.

It is understood that in the 2023 draft for public comments, “conducting securities lending under the ‘Trial Measures for Oversight and Administration of Securities Lending and Borrowing Business,’ with the lending and return of stocks or other equity-type securities” was listed as an exception scenario, but the 2026 new rules remove that exception provision.

The Jiayuan Law Firm stated that this change may be due to the fact that, in practice, some listed-company shareholders may effect an indirect reduction in holdings through securities lending and borrowing business—for example, by lending out shares through securities lending and borrowing, thereby indirectly achieving a “temporary transfer” of shares. For purposes of prudence in determining whether the transaction constitutes short-term trading, securities lending and borrowing transactions should also be treated as “sales.”

The 2026 new rules explicitly stipulate that buy actions resulting from the CSRC ordering repurchase, ordering buyback, or ordering the voluntary buyback of illegally reduced shares by an illegal party do not trigger short-term trading; at the same time, a new legal exemption is added for transactions carried out to respond to major financial risks and to maintain financial stability. The Jiayuan Law Firm said that the above exemption scenarios establish a “illegal reduction of holdings → ordered buyback” logical closed loop. In the past, when shareholders were ordered to buy back, they might worry that the buyback action itself could again constitute short-term trading; the new 2026 rules have completely eliminated this compliance paradox.

As to the applicable entities, Article 8 of the “Provisions” clarifies that the securities whose short-term trading identification is involved include securities held by directors, supervisors, senior management personnel, and natural-person shareholders, including securities held by their spouses, parents, and children, as well as securities held using other people’s accounts.

The Dacheng Law Firm stated that this means that the “key few” must not only manage their own securities properly, but also strengthen the management of securities accounts of family members, so as to avoid violations caused by misoperations by close relatives. In particular, for securities held by the spouses, parents, and children of investors with specific identities, the “Provisions” clarify that, based on the relationship of identity, they are unconditionally deemed to be the securities held by the investor themselves; whereas for securities held by other third parties who do not have a close relative relationship, they must constitute “holding through other people’s accounts” in order to be combined and calculated. This will create relatively large difficulty in evidence collection in cases where the parties have colluded in advance, posing challenges to securities administrative law enforcement.

Editor: Zhan Heng

Layout: Wang Lul ut

Proofreading: Yao Yuan

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Responsible editor: Wang Ke