On October 16, the People's Bank of China released a draft of the "Interbank Bond Market Bond Issuance Management Rules" for public comment, aiming to tighten oversight across the entire bond issuance process.
The draft, comprising 28 articles, strengthens regulation of bond issuance behavior across three dimensions — issuers, underwriters, and investors.
Regulating issuer pricing conduct includes prohibiting issuers from subscribing to or disguisedly subscribing to their own issued bonds, and stipulating that no person may directly or indirectly assist an issuer in subscribing to or disguisedly subscribing to its own bonds. It also bans issuers from interfering with investors' subscription decisions or disrupting pricing through rebate arrangements, clarifies pricing requirements for different issuance methods, and encourages issuers to optimize underwriter selection mechanisms and standards to improve underwriting service quality.
Regulating underwriter conduct includes prohibiting low-price underwriting by stipulating that underwriting fees must not be significantly below fair industry levels. It bans pre-committing to bid prices or issuance prices (interest rates), standardizes practices such as firm-commitment underwriting and proxy bidding and payment, and strengthens internal control requirements for conflicts of interest and information barriers at underwriting institutions, as well as market-based constraints such as enhanced information disclosure.
Regulating investor subscription behavior includes prohibiting false bidding by investors, banning deliberate large-volume orders followed by cancellations that disrupt bond issuance prices (interest rates) and allocations, and prohibiting bid prices significantly below fair market levels for the purpose of manipulating pricing. The rules also set clear prohibitions on insider trading and benefit transfers.
Standardizing book-building and other issuance processes requires that book-building venues be capable of recording all inquiry, adjustment, and pricing decision information throughout the process, forming tamper-proof records for post-event verification. The rules also strengthen oversight of the issuance pricing process, clarifying that the PBOC supervises bond issuance in the interbank market. They establish a closed-loop management mechanism covering front-line monitoring, self-regulatory management, administrative oversight, and unified enforcement. The PBOC and its branches may take regulatory measures such as ordering corrective action and conducting regulatory talks, and may impose administrative penalties for violations in accordance with the law. Criminal cases suspected of violations will be referred to judicial authorities for prosecution.
The full text of the "Interbank Bond Market Bond Issuance Management Rules (Draft for Comment)" is as follows:
Article 1 These rules are formulated in accordance with the Law of the People's Republic of China on the People's Bank of China and other relevant laws and regulations to standardize bond issuance behavior in the interbank bond market, maintain market order, and promote healthy market development.
Article 2 These rules apply to negotiable securities issued by domestic and overseas issuers in the interbank bond market that stipulate repayment of principal and interest on schedule (hereinafter referred to as bonds). Entities and individuals participating in bond issuance in the interbank bond market shall comply with these rules.
Article 3 Bond issuance shall follow the principles of market orientation, rule of law, fairness and justice, and good faith. The issuance price, interest rate, and commission fees involved in the issuance process shall be determined through market-based methods. No entity or individual may influence the fair pricing of bonds, engage in unfair competition, transfer benefits, seek improper gains, harm investor rights, or disrupt market order.
Article 4 The People's Bank of China shall supervise and administer bond issuance in the interbank bond market in accordance with the law. The National Association of Financial Market Institutional Investors (hereinafter referred to as NAFMII) shall perform self-regulatory duties for bond issuance in the interbank bond market. The PBOC may send observers to supervise bond issuance on-site to maintain fairness, justice, and order.
Article 5 Issuers shall strictly comply with laws and regulations governing the interbank bond market, maintain market order, and protect investor rights. Issuers may flexibly adjust issuance scale based on market conditions. Issuers shall not subscribe to or disguisedly subscribe to their own issued bonds. Where shareholders holding more than 5% of an issuer's shares or other related parties directly or indirectly subscribe to the issuer's bonds, information shall be disclosed in a timely manner.
Article 6 Issuers may, on the basis of legal compliance, choose underwriting-based issuance or direct issuance to investors. Where underwriting-based issuance is chosen, issuers may independently decide whether to form an underwriting syndicate. Where issuers choose direct issuance to investors, they shall ensure fairness and justice in bond issuance and bear information disclosure obligations and investor protection responsibilities themselves.
Article 7 Issuers shall establish a multi-dimensional underwriter selection mechanism, comprehensively considering underwriters' market pricing capability, issuance plan design capability, and sales capability, and select underwriters on the principles of fairness and justice. Issuers shall reasonably set underwriting fee allocation principles and are encouraged to allocate underwriting fees based on underwriters' division of responsibilities and the quality of orders introduced.
Article 8 Underwriters and securities service institutions shall reasonably determine various service fees involved in bond issuance based on market principles, and shall not quote at levels significantly below fair industry levels or obtain clients through unfair competitive practices such as low-price firm-commitment underwriting or disguised firm-commitment underwriting. No entity or individual may interfere with underwriters or securities service institutions in independently conducting business in accordance with the law.
Article 9 Issuers shall take effective measures to ensure their non-public information is not improperly leaked or used. Bond underwriters shall establish and strictly implement risk management and internal control systems for underwriting business, effectively isolate and prevent conflicts of interest, and ensure the bond underwriting process is fair and just. Teams responsible for bond origination and execution shall maintain necessary information barriers from teams responsible for bond sales. Bond underwriting business shall remain relatively independent from bond investment and trading, deposit and loan business, and interbank business. Underwriters are encouraged to provide market-making services for newly issued bonds to promote active secondary market trading.
Article 10 During the bond issuance process, issuers, underwriters, and securities service institutions shall ensure fairness and justice in bond issuance, ensure the timeliness, authenticity, and consistency of information obtained by investors, and shall not improperly transmit pricing, subscription, or bidding information to mislead or induce investors. During the bond issuance process, underwriters shall identify investor suitability and understand investor circumstances. Where an underwriting syndicate is formed, syndicate members shall provide the lead underwriter with working papers on investor suitability identification.
Article 11 Bond issuance may adopt methods such as bidding, book-building, quoting, and negotiation to determine prices. Issuers adopting quoting or negotiation methods shall themselves possess professional pricing capability and be familiar with the pricing mechanisms of the interbank bond market.
Article 12 Bond issuance price (interest rate) ranges shall be reasonably set. Bond bidding or book-building price (interest rate) ranges shall include the fair prices (interest rates/yields) of comparable bonds. Where quoting or negotiation methods are adopted for issuance, bond prices (interest rates) shall reference the fair prices (interest rates/yields) of comparable bonds.
Article 13 Where bidding is adopted for pricing, issuers, bidding participants, and other relevant parties shall comply with the relevant provisions governing bidding issuance in the interbank bond market, and shall prohibit insider trading, fraud, collusion, and other acts that harm fair competition.
Article 14 Where book-building is adopted for pricing, issuers may independently choose to conduct book-building at an underwriter's own book-building venue or a centralized book-building venue provided by a third party. Book-building venues shall maintain the safety and efficiency of systems related to bond issuance to ensure smooth operation. Book-building venues shall meet the following conditions: (1) have a dedicated department responsible for book-building business staffed with qualified full-time personnel; (2) have an independent physical venue equipped with a safe and stable book-building system capable of truthfully, accurately, completely, and timely recording subscription information, price range adjustment changes, pricing, allocation, and other decision-making processes during book-building, and forming tamper-proof electronic records; (3) have comprehensive on-site management systems for book-building, with clear provisions on venue use, personnel responsibilities, operating procedures, and emergency handling. Entities providing book-building services shall file post-event records with the PBOC provincial branch where the book-building venue is located.
Article 15 Bond underwriting business shall adopt either best-efforts underwriting or firm-commitment underwriting. Where underwriters conduct standby firm-commitment underwriting, it shall be carried out after the bond underwriting period ends and shall not crowd out the effective subscription scale of the market. Before the underwriting period ends, bonds to be underwritten on a firm-commitment basis shall not be pre-purchased and retained. Where book-building is adopted, the standby firm-commitment subscription interest rate shall in principle be determined at the upper limit of the bond interest rate range.
Article 16 Bond issuance documents shall clearly stipulate bond allocation principles (including marginal allocation), and allocation principles shall be clear and transparent. Bond allocation and distribution shall be strictly carried out in accordance with the stipulations.
Article 17 Investors conducting bond subscriptions shall make independent and prudent quotations and subscription decisions based on their own actual financial conditions and investment strategies. Where book-building is adopted for pricing and underwriters accept entrusted investment, the investor orders shall clearly indicate the entrusting party's information.
Article 18 Issuers or underwriters shall commit to the legality and compliance of the bond issuance process and timely disclose issuance results. Where underwriters engage in firm-commitment underwriting or underwriter-related parties subscribe, the relevant circumstances shall be disclosed in a timely manner.
Article 19 Issuers, book-running managers, underwriters, investors, and venues organizing bond issuance and other participants shall properly manage the information storage and security of bond issuance work archives. Retained content shall be standardized, complete, and traceable, comprehensively reflecting the entire issuance pricing process including bond inquiries, bond price (interest rate) range setting and adjustment, determination and allocation, including but not limited to inquiry process information, subscription order records, pricing process explanations, audio and video recordings, communication records, and final allocation results. Where instant messaging tools are used for communication, relevant communication information shall also be timely recorded and retained. Unless otherwise provided by laws and regulations, retained archives shall continue to be kept for five years after the bond principal and interest are repaid.
Article 20 Where market participants engage in any of the following acts, the PBOC and its branches may take regulatory measures such as regulatory talks, issuing reminder or warning letters, ordering public explanations, and ordering corrective action: (1) forcing down underwriting fees, or directly or indirectly linking underwriter selection to bond issuance prices (interest rates) or subscription scale; (2) underwriters failing to establish effective internal control mechanisms for risk prevention and conflict of interest as required by these rules; (3) underwriters soliciting business through unfair means such as quoting significantly below fair industry levels; (4) underwriters accepting entrusted investment without indicating the entrusting party's information as required by these rules; (5) market participants failing to manage, transmit, disclose, or retain information as required by these rules; (6) venues organizing bond issuance failing to meet the requirements of Article 14 of these rules.
Article 21 Where market participants engage in any of the following acts, the People's Bank of China may impose penalties in accordance with the Law of the People's Republic of China on the People's Bank of China. Where a crime is suspected, the case shall be referred to judicial authorities for criminal prosecution in accordance with the law: (1) disrupting bond issuance pricing by returning underwriting fees, directly or indirectly providing financial assistance to investors, or compensating for investment losses; (2) improperly interfering with investors' subscription decisions, forcing underwriters or investors to subscribe to firm-commitment underwriting; (3) issuers subscribing to or disguisedly subscribing to their own issued bonds; (4) directly or indirectly assisting issuers in subscribing to or disguisedly subscribing to their own bonds; (5) shareholders holding more than 5% of an issuer's shares or other related parties engaging in price manipulation or benefit transfers through direct or indirect subscription to the issuer's bonds; (6) pre-purchasing underwritten bonds before the underwriting period ends, engaging in firm-commitment underwriting or disguised firm-commitment underwriting for the purpose of price or issuance volume manipulation; (6) pre-committing to bond bid prices or issuance prices (interest rates); (7) providing false information or uncertain material information to mislead or induce investors; (8) individually or through collusion or conspiracy manipulating issuance prices or quantities; (9) fabricating bid scale or subscription intent for false bidding; (10) deliberately submitting large-volume orders and canceling bid prices or quantities to disrupt bond issuance prices (interest rates) and allocation; (11) bidding at prices significantly below fair market prices for the purpose of deliberately disrupting pricing; (12) improperly manipulating bond market prices and issuance scale; (13) using non-public information for insider trading; (14) seeking improper benefits or transferring benefits to other entities through nominee holding or proxy bidding; (15) other acts violating these rules and acts violating fair competition or disrupting market order. Where illegal acts involve matters under unified enforcement in the bond market, they shall be handled in accordance with the unified enforcement mechanism.
Article 22 PBOC branches in all provinces, autonomous regions, municipalities directly under the Central Government, and cities under separate state planning shall strengthen monitoring of bond issuance pricing within their jurisdictions. Where bond pricing is found to significantly deviate from fair value, they may promptly seek information from relevant institutions through letter inquiries, meetings, and other measures, requiring relevant units to provide explanations and pricing basis. Where clues of violations are discovered, they shall promptly report to the PBOC and notify NAFMII, and actively cooperate with the head office in conducting enforcement inspections. Relevant units and individuals shall cooperate and truthfully provide relevant documents and materials, and shall not refuse, obstruct, or conceal.
Article 23 The National Interbank Funding Center and interbank bond market registration, custody, and settlement institutions shall actively play a front-line monitoring role, strengthen monitoring of the issuance pricing aspects involved in their business, and promptly report major violations by financial institutions to the PBOC and relevant financial regulatory authorities. Market participants who discover violations in bond issuance may file complaints or reports in accordance with laws and regulations.
Article 24 NAFMII shall formulate self-regulatory management rules in accordance with these rules. Upon discovering or receiving clues of violations of self-regulatory rules, NAFMII shall promptly initiate self-regulatory investigation procedures, form handling opinions, and report to the PBOC. NAFMII shall establish and improve a market-based evaluation mechanism linking underwriters' pricing capability with underwriter evaluation results, and strengthen market-based constraints on underwriter behavior.
Article 25 Where enterprises, underwriters, securities service institutions, and relevant personnel fail to fulfill information disclosure obligations in accordance with relevant provisions of the interbank bond market, or where disclosed information or documents produced contain false records, misleading statements, or major omissions, the PBOC will handle information disclosure violations in accordance with relevant provisions; where matters involve unified enforcement in the bond market, they shall be handled in accordance with the unified enforcement mechanism.
Article 26 Asset-backed securities in the interbank bond market shall be governed by these rules by reference.
Article 27 The People's Bank of China is responsible for interpreting these rules.
Article 28 These rules shall take effect on [date].
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