Market making business live on China’s Nasdaq equivalent, STAR

Market making on the STAR Market will help build a capital market with Chinese characteristics, the regulator said.

The China Securities Regulatory Commission (CSRC) has approved the first batch of STAR Market makers, who officially launch today the market-making trading business of stocks on the STAR Market.

The STAR Market is a Chinese science and technology focused equities market established on July 22, 2019, officially known as the Shanghai Stock Exchange Science and Technology Innovation Board. It is touted as Shanghai’s equivalent to America’s Nasdaq.

A recent report by Financial Times has suggested that there is a trend among pre-IPO Chinese companies to look into listings in Mainland China instead of in Hong Kong or the United States.

In the first half of 2022, IPOs in Chinese stock markets (at almost US $35 billion) raised more than double the amount raised on Wall Street ($16 billion), and much of the fundraising was in the Star Market, with a focus on companies in the fields of renewables, semiconductors and other high-end manufacturing.

A capital market with Chinese characteristics

The SSE, China Securities Finance Corporation Limited and China Securities Depository and Clearing Corporation Limited jointly issued the Detailed Rules for Market Making and Securities Lending Business on the STAR Market, which took effect from the date of publication.

The market making and securities lending business on the STAR Market aims to promote the market maker mechanism to fully leverage its market function, actively expand the securities resource of market making business, and ensure the smooth operation of the market-making trading business of stocks on the STAR Market.

The introduction of a market maker mechanism on the STAR Market is an important measure to improve the basic system of the capital market and further play the role of “pilot zone” of STAR Market reform.

Market making helps improve the liquidity of stocks, release market vitality and enhance market resilience as well as reduce transaction costs and improve market pricing efficiency.

The introduction of market making is believed to promote the high-quality development of the STAR Market and build a capital market with Chinese characteristics.

The China Securities Regulatory Commission will provide oversight of the market-making trading business of stocks on the STAR Market and improve relevant supporting mechanisms.