New short-term trading regulations take effect today: How will they impact small and medium investors' "pocketbooks"?

How will AI · list-based regulation promote the formation of a market value investment ecosystem?

China National Radio (Beijing), April 7 (reported by the reporter Fu Tianming). On April 7, the “Several Provisions on Short-term Trading Supervision” issued by the China Securities Regulatory Commission was officially implemented (CSRC Announcement [2026] No. 4) (hereinafter referred to as the “Provisions”). The Provisions contain 12 articles. Focusing on four core aspects—applicable subjects and scope of securities, identification of shareholding and trading time points, exempted application scenarios, and calculation of shareholdings by professional institutions—it sets out a comprehensive institutional framework regulating short-term trading conduct by controlling shareholders, directors, supervisors, and senior management of listed companies.

Tian Lihui, Dean of the Nankai University Institute of Financial Development, believes the new rules achieve regulatory gap-filling through three major breakthroughs of “clarity, comprehensiveness, and precision,” marking that China’s short-term trading supervision is moving from “principled prohibition” to “list-based management.” Liu Zhigeng, a well-known tax and finance expert, also said that the new rules focus on the practical impact and compliance requirements for the “key minority,” which will further improve the market compliance system.

Blocking loopholes in household-account sub-account allocations

The Provisions define the standards for identifying short-term trading across four levels: subject qualifications, security types, trading time points, and shareholding calculations.

With regard to applicable subjects, the Provisions clarify that where either a purchase or sale involves the identity of a controlling shareholder (a shareholder holding more than 5% of the shares of a listed company or a New Third Board company), or directors, supervisors, or senior management, all such circumstances must comply with the short-term trading system. This also applies when a party does not possess the above-mentioned identities at the time of purchase but does at the time of sale; additionally, the securities held by the spouse, parents, children of controlling shareholders and directors/supervisors/senior management, as well as securities held through other persons’ accounts, are also included in the scope of supervision.

Tian Lihui noted: “This arrangement closes the loophole of evading supervision by using household accounts to divide up allocations among sub-accounts, ensuring that all market participants start from a relatively fair information ‘starting line,’ so that small and medium investors are no longer passively harmed due to information disadvantages.”

On the security types side, the Provisions clarify that equity-type securities such as depositary receipts, exchangeable corporate bonds, convertible corporate bonds, etc. are all included in the scope of supervision, while securities lending and borrowing through the securities lending and borrowing program is not considered an exemption. “The new rules comprehensively bring these derivatives under supervision and completely close the institutional back door for circumventing supervision in disguise through derivatives and lending channels,” Tian Lihui added.

Regarding the identification of trading time points, the Provisions clarify that the trading time point is the securities transfer registration date. The controlling shareholder’s shareholding ratio is calculated by combining the shares issued domestically and abroad for the same listed company or New Third Board company. For the same offshore investor holding securities through different channels—including qualified foreign institutional investors, RMB qualified foreign institutional investors, foreign strategic investors, and Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect—the number of securities held is calculated in aggregate.

Tian Lihui said: “By unifying the rules for trading time points and the calculation of aggregated shareholdings, the ambiguous area of disputes in the past about whether it was the ‘trade date’ or the ‘transfer date’ is brought to an end, making regulatory standards clearer and enforcement more efficient.”

The reporter learned that, with regard to exempted scenarios, the Provisions specify 13 types of exempted application scenarios, covering three categories of circumstances: support for business development, non-trading-related changes in shareholding, regulatory requirements and risk disposal. At the same time, it is explicitly clarified that cases involving the use of information advantages to obtain illegal benefits are not eligible for exemption. Liu Zhigeng added that these provisions “neither suppress reasonable trading nor precisely crack down on illegal arbitrage.”

Bridging and laying the groundwork for long-term funds

The Provisions make differentiated arrangements for products managed by professional institutions. Specifically, it clarifies that domestic public funds, social security funds, insurance funds, and compliant private asset management products managed by securities and futures operation institutions, as well as offshore public funds under qualified foreign institutional investors (QFII), RMB qualified foreign institutional investors (RQFII), and Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect, may calculate shareholdings separately by product or by a single code account. If a product cannot be independently operated and regulated, has conflicts of interest, or violates laws and regulations, it will not be calculated separately.

Tian Lihui analyzed that the core idea conveyed by this differentiated regulatory approach is “let long-term funds have more room while keeping arbitrage under control.” “On the one hand, allowing public funds, social security, and pension funds to calculate shareholdings separately by product releases the constraints from the past where aggregating calculations across multiple products could lead to passive non-compliance during normal rebalancing. On the other hand, strict exemption restrictions also strictly prevent channel arbitrage, clearly signaling that regulators welcome genuine institutions and remain vigilant against pseudo tools.”

Liu Zhigeng further interpreted: “The arrangement in the Provisions to calculate shareholdings separately by product or by a portfolio will bring three substantial real benefits to medium- and long-term funds such as public funds, social security funds, basic pension funds, annuity funds, insurance funds, and qualifying northbound funds. First, it reduces transaction frictions and enhances flexibility in asset allocation. Second, it promotes opening-up and realizes ‘equal treatment’ for domestic and offshore public funds. Third, it supports the development of medium- and long-term funds in a professional and product-oriented manner.”

CITIC Founder Securities (CITIC Securities) commented that the arrangement “solves the operational difficulty arising from the possibility that an institution’s funds trading between products could trigger short-term trading restrictions,” which helps “reduce institutional costs for medium- and long-term funds entering the market.”

Four aspects of positive changes

Tian Lihui said that the role of the new rules in fostering a value investment ecosystem is reflected in two keywords: “fairness” and “patience.” “By facilitating long-term funds such as social security and insurance to enter the market, more ‘ballast-stone’ funds focusing on long-term value will be brought in, which in turn compels controlling shareholders and directors/supervisors/senior management to shift from short-term gamesmanship to creating intrinsic company value within the company.”

He further emphasized: “The clearer the rules on short-term trading are, the more fertile the soil for value investing becomes. The clearer the rules, the more the market respects them. The more clearly the boundaries are defined, the more steadfast long-term capital will be. Ultimately, progress in the system will settle into the market’s belief.”

Liu Zhigeng believes: “This comprehensive tightening of short-term trading supervision will push the market’s trading order and the logic of stock price volatility toward a more rational and long-term direction, by strengthening behavioral constraints on the ‘key minority,’ improving rule transparency, and enhancing consistency in enforcement. Specifically, it will bring four aspects of positive change: first, compress the space for information arbitrage and make the price discovery mechanism more effective; second, stabilize expectations of medium- and long-term funds and optimize the structure of market investors; third, clarify the boundaries of exemptions, reduce compliance concerns, and unleash the vitality of reasonable trading; fourth, unify law enforcement standards, reduce regulatory arbitrage, and enhance the sense of market fairness.”

According to the Provisions, the CSRC will organize securities trading venues to do a good job in implementation, continuously optimize short-term trading supervision, and provide a solid institutional guarantee for high-quality development of the capital market.