Shanghai Stock Exchange
The Shanghai Stock Exchange (SSE) is the primary stock exchange located in the city of Shanghai, China. It is a non-profit, self-regulated organization that oversees activities in the Chinese securities market. It is one of the two stock exchanges operating independently in the country (the other being in Shenzhen), and is featured in the top 15 largest stock exchange entities in the world.
The SSE was established on November 26, 1990, and began its trading operations in 1992. It was created by a merger of the Shanghai Stock Exchange, opened in 1911 and closed in 1945, and the Shanghai Shenzhen Stock Exchange, opened in 1984. The SSE is administered by China Securities Regulatory Commission (CSRC).
The SSE features both the Shanghai and Shenzhen stock markets, through which market participants use it to buy and sell equity, debt instruments, and other securities listed in the exchange. In addition to its local scope, the SSE also has formed agreements with the New York Stock Exchange, London Stock Exchange, the Tokyo Stock Exchange, and the Singapore Exchange for information sharing and joint initiatives.
The SSE has a statutory dual-track system for companies looking to list on the exchange. A non-tradable State-owned Enterprises (SOE) in China must first list on the Main Board, and then the ChiNext stocks, otherwise known as Growth Enterprises Market (GEM), located in Shenzhen, and contains 300 stocks. This is to ensure that the SOEs maintain full disclosure, transparency and currency with company filings, as part of meeting corporate governance standards.
Currently, the SSE has 847 listed companies, with a market capitalization of 4.18 trillion RMB (about $605.2 billion). These companies are involved in different sectors, such as Constructions, Advanced Industries, Financial and Investment, and Consumer Services. The SSE is the main exchange where the largest Chinese publicized enterprises are listed. These include major players, such as China Unicom, China Merchants Bank, and China Life Insurance Company.
The SSE also uses the Hedging Margin System (HMS) to protect its participants against any financial accidents. The System consists of two margin accounts held by three parties: one account held by the participants custodian and the other by the central counterparty (CCP) which is the Shanghai Clearing House. The Shanghai Clearing House provides the roles of settlement enterprise, price formation institution, clearing and settlement institution.These roles play a critical part in SSE’s operations, as it minimizes settlement risk of the listed companies.
To remain competitive, the SSE is currently establishing an electronic trading platform to help investors and other market participants to rapidly trade securities. This platform would allow users to buy and sell stocks quickly and easily through the internet, providing enhanced liquidity and reduced transaction times and costs.
The SSE has been highly successful in its main goals – to ensure the growth and stability of the Chinese stock market. It is poised to become a major force in the global securities markets in the not so distant future.
