On the evening of September 7th, Shanghai Stock Exchange, Shenzhen Stock Exchange, and China Financial Futures Exchange publicly sought opinions on the index circuit breaker related regulations.

The draft for soliciting opinions pointed out that when1.68 percentage pointsthe intraday rise or fall of the index reaches a certain threshold, trading in all stocks, convertible bonds, detachable convertible bonds, stock options and other related stock varieties listed on the Shanghai and Shenzhen stock exchanges will be suspended, and all stock index futures contracts of the China Financial Futures Exchange will be suspended. After the suspension period, trading will resume depending on the situation, or the market will be closed. The deadline for the draft is September 21st.

The key points of the circuit breaker mechanism draft are as follows:

1. The Shanghai and Shenzhen 300 Index is used as the benchmark index for the circuit breaker mechanism.

2. Two threshold levels of 5% and 7% are set for the index circuit breaker mechanism. When the rise or fall of the index triggers the circuit breaker, both upward and downward trading will be suspended. Each level can only be triggered once within the day.

3. The suspension time for the index circuit breaker is determined by level. When the 5% circuit breaker threshold is triggered, trading is suspended for 30 minutes. After the circuit breaker ends, a closing auction will be held and trading will continue for the rest of the day. If the 5% circuit breaker threshold is triggered after 2:30 pm, or if the 7% circuit breaker threshold is triggered at any time during the day, trading will be suspended until the market closes. For securities whose trading has not resumed by the market close at 3 pm, the closing price will be the volume-weighted average price of all trades in the last minute before the last trade that day. The closing price for options contracts will still be determined according to relevant regulations.

4. Special arrangements for certain periods. First, the opening auction phase will not implement the circuit breaker mechanism; if the opening index has triggered the 5% threshold, the circuit breaker will be implemented starting at 9:30 am, and trading will be suspended for 30 minutes. If the opening index has triggered the 7% threshold, the circuit breaker will be implemented starting at 9:30 am and trading will be suspended until the market closes. Second, if the morning circuit breaker time is insufficient, it will be supplemented after the afternoon opening, and the lunch break time will not be counted as part of the circuit breaker time to facilitate investor adjustment of orders. Third, the circuit breaker mechanism is valid all day. Considering that the A-share market is prone to irrational large fluctuations in the closing stage, A-shares continue to implement the circuit breaker in the closing stage. Fourth, the circuit breaker will only be implemented in the morning of the stock index futures delivery day. Regardless of whether the temporary suspension of trading is triggered by the 5% or 7% threshold, trading will be resumed in the afternoon to facilitate the calculation of the settlement price of stock index futures and smooth delivery.

Industry insiders say that the main purpose of the circuit breaker mechanism is to give the market a period of calm, allow investors to fully digest market information, prevent irrational large fluctuations in the market or in certain products, especially prevent a crash, and maintain market stability. Dongwu Futures Research Institute director Jiang Xingchun said that once the circuit breaker mechanism is triggered, there is a considerable risk and volatility in the market, and the circuit breaker mechanism allows market participants to pay attention to risks and treat current market conditions rationally. The short suspension of trading enables both long and short positions in the market to maintain rationality and correctly evaluate future market trends in order to make risk management decisions, while also slightly interfering with program trading. Cheng Xiaoyong, assistant director of Baicheng Futures Financial Research Institute, said that the circuit breaker mechanism is equivalent to a "shock absorber", and its advantages are in the following aspects: first, it provides early warning of trading risks in the market, effectively preventing the suddenness and seriousness of risks; second, it provides thinking and operation time for controlling trading risks; third, it helps eliminate market liquidity declines caused by outdated prices; and fourth, it provides institutional guarantees for gradually resolving trading risks.

The circuit breaker mechanism is like a "shock absorber".

The so-called circuit breaker mechanism is a protective measure established by the US Securities and Exchange Commission (referred to as the "SEC") to suspend trading for a period of time when the price fluctuation exceeds a certain predetermined limit, similar to a fuse that melts when too much current flows through it to protect electrical appliances from damage.

According to the latest regulations of the SEC, when the S&P 500 index falls 7% in a short period of time, all securities market trading in the United States will be suspended for 15 minutes, which is the so-called "circuit breaker mechanism". However, the standards are slightly different for stock index futures trading outside of US stock trading hours.

Industry insiders say that the main purpose of the circuit breaker mechanism is to give the market a period of calm, allow investors to fully digest market information, prevent irrational large fluctuations in the market or in certain products, especially prevent a crash, and maintain market stability.

Dongwu Futures Research Institute director Jiang Xingchun said that once the circuit breaker mechanism is triggered, there is a considerable risk and volatility in the market, and the circuit breaker mechanism allows market participants to pay attention to risks and treat current market conditions rationally. The short suspension of trading enables both long and short positions in the market to maintain rationality and correctly evaluate future market trends in order to make risk management decisions, while also slightly interfering with program trading.

Cheng Xiaoyong, assistant director of Baicheng Futures Financial Research Institute, said that the circuit breaker mechanism is equivalent to a "shock absorber", and its advantages are in the following aspects: first, it provides early warning of trading risks in the market, effectively preventing the suddenness and seriousness of risks; second, it provides thinking and operation time for controlling trading risks; third, it helps eliminate market liquidity declines caused by outdated prices; and fourth, it provides institutional guarantees for gradually resolving trading risks.

Attached: Notice on soliciting opinions on index circuit breaker related regulations

Shanghai Stock Exchange Notice [2015] No.25

In order to prevent the risk of large fluctuations in the market, further improve the trading mechanism of China's securities market, maintain market order, protect the rights and interests of investors, and promote the long-term stable and healthy development of the securities market, with the approval of the China Securities Regulatory Commission, Shanghai Stock Exchange, Shenzhen Stock Exchange (referred to as "Shanghai and Shenzhen Stock Exchanges") and China Financial Futures Exchange (referred to as "China Financial Futures Exchange") propose to introduce a circuit breaker mechanism based on the existing individual stock price fluctuation limit.

The overall arrangement of the index circuit breaker mechanism is: when the daily rise and fall of the CSI 300 index reaches a certain threshold, all stocks, convertible bonds, detachable convertible bonds, stock options and other related stock products listed on the Shanghai and Shenzhen Stock Exchanges will be suspended, and all stock index futures contracts of the China Financial Futures Exchange will be suspended. After the trading suspension period is over, trading will resume depending on the situation or directly close. The main points and considerations of the index circuit breaker plan are as follows:

First, the CSI 300 index is used as the benchmark index for the circuit breaker mechanism. The main considerations are: first, cross-market indices are better than single-market indices. Cross-market indices are more representative and can more comprehensively reflect the overall fluctuations of A-share market, while single-market indices mainly reflect the operating conditions of specific markets. The second is to prefer the CSI 300 index in cross-market indices. At present, cross-market indices familiar to A-share market investors include the CSI 300 index (mainly consisting of large and medium-capitalization stocks) and the CSI 500 index (mainly consisting of small and medium-capitalization stocks). The market value coverage rate, the number of tracked index products, and the scale of the CSI 300 index are all larger than those of the CSI 500 index.Second, set two circuit breaker thresholds of 5% and 7%, and circuit breakers are triggered for both rising and falling, with a maximum of only one circuit breaker in each period. The main considerations are: first, using 5% as the first threshold can take into account the double needs of setting a cooling-off period and maintaining normal trading; although triggering a 7% circuit breaker is rare, it is a major abnormal situation that needs to be prevented and should be considered together. The second is that a bidirectional circuit breaker is more conducive to suppressing excessive trading and controlling market volatility. The domestic market is in the stage of emerging and transitioning, with small and medium retail investors making up the main investment structure. The bidirectional price fluctuations are large, with panic-driven falls and rapid rises, including the short-term market surge caused by accidents. Therefore, when the market is

excessively rising,

the circuit breaker mechanism is also needed to stabilize the market frenzy, prevent investors' excessive reactions to the market's rise, and give investors more time to further confirm whether the current price is reasonable. Third, the circuit breaker time is determined by zones. When the 5% circuit breaker threshold is triggered, trading is suspended for 30 minutes, and a call auction is conducted when the circuit breaker ends, followed by continue trading on the same day. If the 5% circuit breaker threshold is triggered after 14:30, or the 7% circuit breaker threshold is triggered at any time during the day, trading will be suspended until the close. If trading is not resumed until 15:00 closing after the halt, the closing price of the relevant securities will be the volume-weighted average price of all trades in the last minute before the last transaction of the securities on that day (including the last transaction), and the closing price of the option contract will still be executed according to the relevant rules.

Fourth, special period arrangements. First, circuit breakers are not implemented during the opening call auction phase; if the opening index point has triggered the 5% threshold, a circuit breaker will be implemented starting at 9:30 and trading will be suspended for 30 minutes; if the opening index point triggers the 7% threshold, a circuit breaker will be implemented starting at 9:30 and trading will be suspended until the close. Second, if the duration of the morning circuit breaker is insufficient, it will be supplemented after the afternoon opening, and the lunch break time will not be counted in the circuit breaker duration to facilitate investors to adjust their declarations. Third, the circuit breaker mechanism is valid all day. Considering that the domestic A-share market is prone to irrational large fluctuations in the tail-end phase, circuit breakers are still implemented in the tail-end phase of A-shares. Fourth, a circuit breaker is only implemented in the morning on the day of stock index futures delivery, and trading will be resumed in the afternoon after a 5% or 7% circuit breaker-triggered trading halt to facilitate the calculation of the delivery and settlement price of stock index futures and ensure the smooth delivery.

Fifth, the scope of index circuit breakers and the linkage of spot and futures. When a circuit breaker is triggered, the Shanghai and Shenzhen Stock Exchanges suspend trading in all stocks, fundconvertible bonds, detachable convertible bonds, stock options and other related stock products throughout the entire market. The specific securities products under circuit breaker will be announced. All stock index futures products are simultaneously suspended for trading (including CSI 300, CSI 500 and SSE 50 stock index futures), but the trading of Treasury bond futures remains normal.

Sixth, the connection between index circuit breakers and trading halts. For listed companies that apply for stock trading halts, or new shares that encounter temporary trading halts during their debut but need to resume trading, if the planned resumption time coincides with the index circuit breaker, the resumption will be postponed until the end of the index circuit breaker. If the index circuit breaker ends but the suspension time of the relevant securities has not yet expired, the suspension will continue.

The Shanghai and Shenzhen Stock Exchanges and China Financial Futures Exchange will supplement specialized regulations on index circuit breakers in their respective trading rules according to the above points (see attachment for details), and now solicit opinions from the public. Any opinions or suggestions should be submitted by email to the relevant exchanges before September 21, 2015.

Please provide feedback by email if you have any comments or suggestions before September 21, 2015.

Shanghai Stock Exchange: tradingdata@sse.com.cn

Shenzhen Stock Exchange: jygz-hyb@szse.cn

China Financial Futures Exchange: qzqhsa@cffex.com.cn

Concept stocks surged today with the approval of Guangdong-Tianjin-Fujian Free Trade Zone. As of the time of publication, Tianjin Free Trade Zone sector ranks among the top gainers. Shenzhen Huafa A leads the way in Guangdong-Hong Kong Free Trade Zone. Zhuhai Port Co., Ltd., Guangdong Expressway and others rank among the top gainers.