‘ Third board’ ex­pands over-the-counter eq­uity mar­ket

China Daily (Hong Kong) - - SUNDAY NEWS - BY CAI XIAO caix­iao@chi­nadaiy.com.cn

The State Coun­cil re­leased a state­ment on the Na­tional Eq­ui­ties Ex­change and Quo­ta­tions on Satur­day, al­low­ing do­mes­tic mi­cro, small and medium- sized en­ter­prises to be listed on the eq­uity ex­change sys­tem.

The state­ment shows China’s ef­forts to build a mul­ti­level cap­i­tal mar­ket and ease com­pa­nies’ fi­nanc­ing prob­lems.

The Na­tional Eq­ui­ties Ex­change and Quo­ta­tions, the so-called “third board”, will be a na­tional eq­uity ex­change, of­fer­ing ser­vices for in­no­va­tive, startup or grow­ing mi­cro, small and medium- sized en­ter­prises, the state­ment said.

The ex­change was founded in 2012 and put into op­er­a­tion this Jan­uary. Pre­vi­ously, un­listed en­ter­prises from four high-tech in­dus­trial parks in Bei­jing, Tian­jin, Shang­hai and Hubei’s pro­vin­cial cap­i­tal Wuhan could ap­ply to trade eq­ui­ties on the third board.

Do­mes­tic com­pa­nies meet­ing re­lated re­quire­ments can ap­ply for list­ings on the Na­tional Eq­ui­ties Ex­change and Quo­ta­tions through bro­kers.

Com­pa­nies listed on the third board can ap­ply for ini­tial pub­lic of­fer­ings on the Shang­hai and Shen­zhen stock ex­changes. Com­pa­nies trans­fer­ring shares on re­gional eq­uity ex­changes can ap­ply for third board list­ings.

The num­ber of share­hold­ers of third board-listed com­pa­nies can ex­ceed 200. And the China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion will reg­u­late th­ese com­pa­nies as un­listed pub­lic com­pa­nies.

Com­pa­nies with no more than 200 share­hold­ers do not need to be ap­proved by the CSRC when ap­ply­ing for third board list­ings.

The state­ments also said China will set up and per­fect an in­vestor-el­i­gi­bil­ity sys­tem and strengthen reg­u­la­tory co­op­er­a­tion.

The CSRC will im­ple­ment the State Coun­cil’s re­quire­ments, and de­velop and re­vise re­lated rules and work­ing pro­cesses, the CSRC said on Satur­day.

The com­mis­sion said it will re­vise reg­u­la­tions of un­listed pub­lic com­pa­nies and make rules con­trol­ling their merg­ers and ac­qui­si­tions.

Yi Ji­gang, pres­i­dent of the Bei­jing- based pri­vate- eq­uity firm Ori­ent Jiyi In­vest­ment, said the Na­tional Eq­ui­ties Ex­change and Quo­ta­tions state­ment is very pos­i­tive for the Chi­nese cap­i­tal mar­ket.

“The third board can help com­pa­nies and in­vestors find good co­op­er­a­tive part­ners and ne­go­ti­ate deals by them­selves, which is very mar­ket-ori­ented,” Yi said.

Yi said the de­vel­op­ment of the third board may at­tract some stock mar­ket funds, but the amount will not be big be­cause third board- listed com­pa­nies re­quire small funds.

A banker at a glob­ally lead­ing in­vest­ment bank, who de­clined to be named, told China Daily the bank had heard the news ear­lier and had re­served some com­pa­nies.

If third board com­pa­nies can ap­ply for IPOs on the stock ex­changes, more se­cu­ri­ties firms will do deals with SMEs, he said.

He said it is dif­fi­cult for se­cu­ri­ties firms to find IPO pro­grams, and third board list­ings can cre­ate many ways for them to earn money.

But in the long- term, he said, the Na­tional Eq­ui­ties Ex­change and Quo­ta­tions should make it­self an in­de­pen­dent eq­uity ex­change, rather than serve as an in­cu­ba­tor of the Shang­hai and Shen­zhen stock ex­changes.

It is called the third board be­cause it is China’s third na­tional eq­uity ex­change, af­ter the Shang­hai and Shen­zhen stock ex­changes. It is also the only over-the-counter mar­ket reg­u­lated by the China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion.

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