Time：2022-08-16
Under the overall planning and guidance of CSRC, SZSE recently issued the Business Guide of Shenzhen Stock Exchange for Credit Protection Instruments (Revised in 2022). Shenzhen Securities Information Co., Ltd. (SSIC), as one of the first portfolio managers of the portfolio credit protection contracts (“CDX”), launched “CNI-SZSE CDX Portfolio for SZSE Major Issuers” and “CNI-SZSE CDX Portfolio for Major Issuers of Guangdong-Hong Kong-Macao Greater Bay Area”, marking the official start of the pilot project of CDX business at SZSE.
On August 15, on completing preparatory work such as qualification filing and business negotiation, eight core CDX traders including China Merchants Securities, CICC, Huatai Securities, CITIC Securities, Guotai Junan, Shenwan Hongyuan Securities, China Securities and GF Securities actively organized and participated in the trading and quoting of the first CDX portfolios. A total of 32 contracts were concluded, with a notional principal of CNY 900 million.
The CDX business is designed to provide credit protection to a basket of bond reference entities including private companies. It has not only met investors’ realistic needs of realizing protection of multiple entities with one contract-based deal but also provided a mechanism for risk diversification with seller credit protection. Complementing the credit protection contract for single reference entities, it has enriched risk hedging strategies and can help further improve the pricing mechanism, enhance market vitality, and strengthen the efficiency of credit protection instruments.
As a CDX portfolio manager, SSIC will, by fully leveraging its professional advantages, be responsible for the full lifecycle of the first portfolios in terms of compilation, release, operation maintenance, etc. and formulate the CDX portfolio credit curve based on market quotation. The 40 SZSE-traded bond issuers of “CNI-SZSE CDX Portfolio for SZSE Major Issuers” have covered basic industries including manufacturing, transportation, energy and building. It is a representative portfolio that measures the credit risk status of the Shenzhen securities market, matching investors’ market risk hedging need. “CNI-SZSE CDX Portfolio for Major Issuers of Guangdong-Hong Kong-Macao Greater Bay Area” includes 25 reference entities with a high credit rating in the Guangdong-Hong Kong-Macao Greater Bay Area and covers about CNY 300 billion exchange-traded bond products. It will help further optimize the financial ecosystem of the Greater Bay Area and better serve the development of the Greater Bay Area and the pilot demonstration area of socialism with Chinese characteristics.
Since the launch of the pilot project of credit protection instruments in November 2018, SZSE has rolled out credit protection contracts and credit protection certificates. So far, 20 institutions have registered as core traders of credit protection contracts of SZSE, and 13 as credit protection certificate makers. A cumulative total of 86 contracts and 10 certificates have been made, with a total notional principal of about CNY 4.8 billion, which has supported enterprise bond issuance of about CNY 38 billion. Next, SZSE will continue to implement the policies of the CPC Central Committee and the State Council on increasing financial support to the real economy and CSRC’s plans and requirements. It will continue to refine the policies and regulations for direct financing. Addressing the main issues of concern and difficulties, it will focus on improving enterprises’ bond financing environment. On the basis of steadily carrying out the pilot project, SZSE will survey demands in depth, strengthen institutional supply, and develop innovative working mechanisms. It will pool market forces, launch more credit protection instruments, and continue to improve the capability of the exchange-traded bond market in serving the real economy.