The construction of systemic infrastructure for the highly anticipated Beijing stock exchange, which is planned as the venue to boost innovation among China's small and medium-sized enterprises, or SMEs, picked up speed on Sunday with the first batch of draft business rules released to solicit public opinion.
The three sets of business rules, released by the National Equities Exchange and Quotations that owns 100 percent stake in the bourse, cover listing, trading and the management of the exchange members.
Rules will conform to the current regulatory arrangements for listed companies to ensure the consistency of regulatory standards among all bourses in China, according to the draft.
The NEEQ Select, the highest tier of the NEEQ system, will be upgraded to cover the Beijing stock exchange. Therefore, the listing rules adopted at the NEEQ Select will be applied as the stock listing rules at the planned Beijing bourse.
Meanwhile, qualified companies traded on the NEEQ Innovation, the NEEQ's second-highest tier, can apply to list on the Beijing bourse as long as they stay listed on the NEEQ Innovation for 12 consecutive months.
There is no compulsory regulation regarding cash dividend ratio for companies that list on the Beijing stock exchange. The purpose is to strike a balance between cost and profit among SMEs, the draft rules state.
The daily price fluctuation limit is set at 30 percent, which is higher than the 10 percent limit for the A-share main board and the 20 percent limit for the STAR Market and the ChiNext board. The purpose of changing the bar for the Beijing bourse is to provide enough leeway for the market to ensure it remains efficient in price discovery, the draft rules state.
Suspended trading will be scrutinized more strictly at the Beijing bourse. There should be no misuse of suspension mechanism, and public companies cannot resort to suspended trading for concealing any information. Continuity in trading should be secured to protect investors' rights, the draft trading rules state.
Therefore, trading suspension should be no more than 10 trading days for scenarios such as major asset restructuring or secondary offering for the purpose of asset acquisition. The ceiling is set at three months at the other A-share boards for similar scenarios.
A maximum five trading days of suspension will be allowed for other major issues for companies listed on the Beijing bourse. If there is a special reason to postpone the date to resume trading, the suspension period should be no more than 25 trading days in total.
The NEEQ system, which debuted in 2013 and is also known as the "new third board", has been originally designed as an equity trading system for SMEs. The planned upgrade will provide a direct financing channel－equity financing－for innovative SMEs, said Jiang Qijia, a senior analyst with Noah Holdings Ltd, a Shanghai-based financial services provider.
In the indirect financing model which has long been dominated by banks, SMEs usually face great difficulty in receiving funding as they cannot provide the collateral required by banks, he said.
Together with the STAR Market at the Shanghai bourse and the ChiNext in Shenzhen, the Beijing stock exchange will better serve the real economy by fulfilling their respective responsibilities, said Dong Zhongyun, chief economist of Avic Securities.
The STAR Market will feature "hard technology" and serve national strategies. The ChiNext will stress the integration of traditional industries and new technologies, industries, as well as business models. The Beijing bourse will mainly serve innovative SMEs, he said.