Recently, "Deepening the reform of the New Third Board and establishing the Beijing Stock Exchange (hereinafter referred to as the" Beijing Stock Exchange ")" has become a hot topic of concern for all sectors of society, especially for the majority of market entities. The China Securities Regulatory Commission has publicly solicited opinions from the public on a series of basic institutional arrangements for the Beijing Stock Exchange, and the Beijing Stock Exchange, which has been working hard to complete the company system registration, has also solicited opinions on the first batch of business rules. These rules and regulations include: "Measures for the Administration of the Registration of Public Offering of Stocks to Unspecified Qualified Investors by the Beijing Stock Exchange (Trial Implementation)", "Measures for the Administration of the Registration of Securities Issuance by Listed Companies on the Beijing Stock Exchange (Trial Implementation)", "Measures for the Continuous Supervision of Listed Companies on the Beijing Stock Exchange (Trial Implementation)", "Measures for the Administration of Securities Exchanges", "Measures for the Supervision and Administration of Unlisted Public Companies" "Administrative Measures for Information Disclosure of Non Listed Public Companies", "Listing Rules of Beijing Stock Exchange (Trial Implementation)" (referred to as "Listing Rules"), "Trading Rules of Beijing Stock Exchange (Trial Implementation)" (referred to as "Trading Rules"), "Membership Management Rules of Beijing Stock Exchange (Trial Implementation)" (referred to as "Membership Management Rules"); Recently, the Beijing Stock Exchange will also publicly seek market opinions on the implementation of self-regulatory rules related to the audit responsibilities under the public offering registration system. It can be seen that, based on the Securities Law, the Company Law, the Notice of the General Office of the State Council on the Implementation of the Revised Securities Law and relevant laws and regulations, the initial construction of the institutional system of the Beijing Stock Exchange, including issuance and listing, continuous financing, continuous supervision, exchange governance, and self-discipline management, reflects the characteristics of institutionalized protection and promoting the future development of the market of the Beijing Stock Exchange. After studying and comparing my own work experience in securities law for over ten years, the author believes that there are nine highlights as follows:

Highlight 1: Overall positioning to serve innovative small and medium-sized enterprises and expand inclusive finance

The institutional system of the Beijing Stock Exchange will be based on and adhere to the market positioning of serving innovative small and medium-sized enterprises, respect the development laws and growth stages of innovative small and medium-sized enterprises, and improve the inclusiveness and accuracy of the system; Overall translation of basic systems such as listing, trading, conversion, and delisting at selected levels of the New Third Board, adherence to appropriate investor suitability management requirements, and the formation of a differentiated institutional arrangement that fits the characteristics of small and medium-sized enterprises, exploring the inclusive financial path of capital market support and service for technological innovation of small and medium-sized enterprises.

Highlight 2: Build a simple, inclusive, and accurate issuance and listing system

The new listed companies on the Beijing Stock Exchange come from innovative companies that have been listed on the New Third Board for 12 months, maintaining a "progressive" market pattern. At the same time, implement the new development concept, highlight the characteristics of "specialized, refined, special, and new" small and medium-sized enterprises, establish a diversified, flexible, and fully gaming underwriting mechanism, focus on serving the real economy, and vigorously support scientific and technological innovation.

The Beijing Stock Exchange pilot securities public offering registration system will establish a review and registration process that focuses on and connects with the registration of the Beijing Stock Exchange and the Securities Regulatory Commission. The various arrangements will be consistent with the overall arrangement of the Science and Technology Innovation Board and the Growth Enterprise Board. Enterprises applying for an IPO on the Beijing Stock Exchange must first be listed on the New Third Board, and must be listed for at least 12 months; The "time point" for applying for an IPO of the Beijing Stock Exchange must be an innovative enterprise.

Given that the selected layer has formed an open, transparent, collaborative and efficient review mechanism in accordance with the spirit of the registration system, and in accordance with the principle of overall translation, this reform does not increase the issuance and listing conditions of the Beijing Stock Exchange; After the opening of the Beijing Stock Exchange, the projects under review at the selected levels of national equity conversion companies were shifted to the Beijing Stock Exchange, and the review and registration procedures continued to be performed in accordance with the registration system requirements. That is, to apply for IPO listing on the Beijing Stock Exchange, the issuance conditions are equivalent to the previously announced "selective layer public offering conditions", which means that one of the following conditions should be met: Standard 1: the market value is not less than 200 million yuan, the net profit in the past two years is not less than 15 million yuan, and the weighted average return on net assets is not less than 8%, or the net profit in the latest year is not less than 25 million yuan, and the weighted average return on net assets is not less than 8%; Standard 2: The market value shall not be less than 400 million yuan, the average operating revenue in the past two years shall not be less than 100 million yuan, and the growth rate of operating revenue in the latest year shall not be less than 30%. The net cash flow generated from operating activities in the latest year shall be positive; Standard 3: Mainly aimed at R&D enterprises with certain R&D capabilities and research results that have initially achieved business revenue, it is set as "the market value is not less than 800 million yuan, the operating revenue in the latest year is not less than 200 million yuan, and the total R&D investment in the last two years accounts for not less than 8% of the total operating revenue in the latest two years"; Standard 4: It is mainly aimed at innovative enterprises with high market recognition and strong R&D and innovation capabilities, but there are no requirements for enterprise revenue and profitability. It is set as "the market value is not less than 1.5 billion yuan, and the total R&D investment in the past two years is not less than 50 million yuan.".

Due to the differentiated competition between the Beijing Stock Exchange and the Shanghai and Shenzhen sectors, most reporting companies generally choose between Standard One and Standard Two. Due to the GEM IPO criteria of "two years of profitability and a total of no less than 50 million profits" and "1 billion valuation+over 100 million revenue in the latest year+positive profit in the latest year", there is a connection with the IPO of the Beijing Stock Exchange. Currently, among the existing companies in the selected layer, the above four sets of standards are covered. Among them, companies that enter the selected layer with the first set of standards account for the vast majority.

Highlight 3: Implement a flexible and diversified continuous financing system

The above rules and regulations closely focus on the needs of innovative small and medium-sized enterprises, summarize practical experience in the construction of selected layers, and further consolidate the "small, fast, flexible, and diverse" refinancing system. In terms of financing types, a relatively rich range of equity financing tools such as ordinary shares, preferred shares, and convertible bonds have been formed, further fitting the actual needs of small and medium-sized enterprises. In terms of issuance methods, diversified financing methods such as public issuance to unspecified qualified investors and issuance to specific targets are implemented, and flexible issuance mechanisms such as authorized issuance, shelf issuance, and self run issuance are introduced to further reduce the financing costs of small and medium-sized enterprises. In terms of pricing mechanism, adhere to the market-oriented orientation, promote full gaming between new and old shareholders, take bidding as the principle, take pricing as an exception, and do not make administrative intervention on the issuance price, scale, etc., strengthen the protection of investors' rights and interests, further improve pricing efficiency, and standardize the issuance order.

Highlight 4: Establish a continuous regulatory system with moderate leniency and severity

On the one hand, it is in line with the basic provisions of the Securities Law and the Company Law on listed companies, strengthening supervision and law enforcement, compacting the responsibilities of all parties, and striving to improve the quality of listed companies on the Beijing Stock Exchange. On the other hand, it is necessary to continue the market characteristics of selected layers that fit the actual situation of small and medium-sized enterprises, adhere to market-oriented orientation, authorize the Beijing Stock Exchange to formulate self-discipline rules based on the actual situation of the market, improve the pertinence and adaptability of various systems, respect company autonomy, promote the formation of market constraints, and build a governance system with clear responsibilities and efficient and orderly operation of all parties.

Compared to companies listed at selected levels, Beijing Jiaotong Office has made four adjustments in terms of continuous supervision: first, corporate governance is more optimized. The situation where independent directors should express their opinions has been increased, and the scope of funds occupying entities has been extended to controlling shareholders, actual controllers, and their related parties, with a focus on "key minority"; It is clear that no new horizontal competition that may affect the ability to continue operations shall be allowed to ensure the independence of listed companies. Second, information disclosure requirements are more specific. For example, the Listing Rules have refined specific requirements for voluntary disclosure, exemption from disclosure, suspension of disclosure, and disclosure of industry and risk information to improve the pertinence and effectiveness of disclosure. Third, the management of suspension and resumption of trading has been stricter. The Listing Rules implement the regulatory principle of "less suspension, short suspension, and phased suspension", requiring listed companies not to abuse the suspension and resumption mechanism, and not to use the suspension to replace information confidentiality, ensure the continuity of market transactions, and protect investors' trading rights. "For those planning major asset restructuring or issuing shares to purchase assets, the suspension period shall be reduced to no more than 10 trading days, and for those planning other major events, no more than 5 trading days. If the resumption of trading is delayed due to special circumstances, the total continuous suspension period shall not exceed 25 trading days.". Fourth, the main responsibility is clearer. "The Beijing Stock Exchange will no longer implement the" lifelong "continuous supervision of the sponsor securities firms, and the recommendation institution will perform the continuous supervision responsibilities within the specified period.". It should be emphasized that in order to ensure a smooth transition, in the early stages of the opening of the Beijing Stock Exchange, the continuous supervision agreement signed between the listed company and the host securities firm should continue to be implemented, and the information disclosure and daily business should still be handled according to the current model. The Beijing Stock Exchange will clarify the subsequent system switching arrangements as soon as possible.

Highlight 5: Clarify the compatibility between corporate exchanges and member management systems

The Beijing Stock Exchange implements a corporate system, establishing an operating mechanism for the shareholders' meeting, board of directors, general manager, and board of supervisors, and forming an efficient and transparent corporate governance structure. Strengthen the supervision of the exchange, implement the main responsibilities of the exchange, improve the procedures for formulating and modifying business rules, and manage the main personnel of the exchange, control the direction of market construction, and promote the effective exertion of the self-discipline management function of the exchange.

According to the "Member Management Rules", the Beijing Stock Exchange explores a member management system that is compatible with corporate exchanges. Members are the qualification carriers for securities companies to conduct business, and members do not enjoy property ownership in corporate exchanges. Implementing member management is to implement the explicit requirements of the upper level law for stock exchanges, and there are also many mature practices in corporate exchanges. The "Member Management Rules" can be used for reference, focusing on clarifying the requirements for member transaction risk control, customer management, transaction information use, and technical system management, strengthening the supervision mechanism, and urging members to take their responsibilities in various business activities.

Highlight 6: Smooth connection of existing sectors and systems

During the establishment and system implementation of the Beijing Stock Exchange, the following principles will be emphasized:

The first is to handle the "two relationships" well. First, the Beijing Stock Exchange, Shanghai and Shenzhen Stock Exchanges, and regional equity markets have adhered to dislocation development and connectivity, and played a role in improving the listing function of the board. Second, the existing innovation and foundation layers of the Beijing Stock Exchange and the New Third Board adhere to overall coordination and institutional linkage to maintain the balance of the market structure. Cultivate and expand enterprises at the innovation and basic levels of the New Third Board, and encourage them to continue listing on the Beijing Stock Exchange; At the same time, adhering to the transfer mechanism and cultivating mature listed companies on the Beijing Stock Exchange can choose to continue to develop in the Shanghai and Shenzhen Stock Exchange. Strengthen the market clearing function and establish differentiated exit arrangements: Qualified companies delisted from the Beijing Stock Exchange can retreat to the innovation layer and the basic layer to continue trading. Those with significant violations of laws and regulations should directly withdraw from the market.

At the same time, strive to achieve the "three goals". First, build a set of basic institutional arrangements that fit the characteristics of innovative small and medium-sized enterprises, including issuance and listing, trading, delisting, continuous supervision, and investor suitability management, to complement the weaknesses of multi-level capital markets in developing inclusive finance. The second is to unblock the tie role of the multi-level capital market of Beijing Jiaotong University, forming a direct financing growth path for small and medium-sized enterprises that complement and promote each other. The third is to cultivate a group of specialized and specialized new small and medium-sized enterprises, and form a benign market ecology with high enthusiasm for innovation and entrepreneurship, active participation of qualified investors, and responsible return of intermediary institutions. According to the official website of the CSRC, given that the selected layer has formed an open, transparent, collaborative and efficient review mechanism in accordance with the spirit of the registration system, and in accordance with the principle of overall translation, this reform does not increase the issuance and listing conditions of the Beijing Stock Exchange. In order to achieve a smooth transition, during the public consultation period for the above rules and regulations, the CSRC continues to accept and review the application for administrative license for the public offering of selected layers. After the opening of the Beijing Stock Exchange, the projects under review at the selected levels of national equity conversion companies were shifted to the Beijing Stock Exchange, and the review and registration procedures continued to be performed in accordance with the registration system requirements.

Highlight 7: Adhere to a flexible trading system and reserve mixed trading space

The Beijing Stock Exchange will adhere to a flexible trading system with continuous bidding as the core at the selected level, implement continuous bidding, and set a valid price range of 5% above and below the benchmark price for limit declarations. The minimum number of trading declarations is 100 shares, and each declaration can be incremented by 1 share; There is no limit on the rise and fall of new shares on the first day of listing, and the limit on the rise and fall is 30% from the next day; Block trading may be conducted if the quantity of a single declaration is not less than 100000 shares or the transaction amount is not less than 1 million yuan. In this way, it can increase market elasticity and promote balanced buying and selling gaming, not only giving the market sufficient price gaming space, ensuring the efficiency of price discovery, but also supporting a temporary suspension mechanism for individual stocks. The main purpose is to avoid market panic and blind trading caused by rapid and irrational fluctuations in stock prices, and to give market investors a certain period of calm. At the same time, it does not change the trading habits of investors, does not increase the market burden, reflects the characteristics of small and medium-sized enterprise stock trading, and ensures the stability and continuity of market trading. Fortunately, the Beijing Stock Exchange has also reserved institutional space for introducing a market making mechanism and implementing mixed trading.

Highlight 8: Make differentiated institutional arrangements for equity incentives and cash dividend ratios

For equity incentives, it is allowed to reasonably set the option exercise price lower than the market price of the stock on the premise of full disclosure and implementation of corresponding procedures to enhance the incentive effectiveness; There are no mandatory requirements for the proportion of cash dividends, and companies are encouraged to "do what they can" based on their actual situation. This also reflects the differentiated institutional arrangement of the market positioning and characteristics of the Beijing Stock Exchange, which is conducive to effectively balancing the normative costs and benefits of innovative small and medium-sized enterprises in the capital market that are still in the "climbing" stage.

Highlight 9: Gradually improve the delisting and other systems to promote the vitality of future market development

The Listing Rules clarify active delisting and mandatory delisting arrangements, which are divided into four categories: trading, financial, regulatory, and major illegal situations, and construct a diversified and rich indicator portfolio; Among them, the mandatory delisting period for the financial category is two years, and the indicators are not cross applicable. It also provides for delisting risk warnings as a pilot system for mandatory delisting, which not only fully reveals risks to the market, but also protects investors' trading rights; Clarify that mandatory delisting is subject to review by the Listing Committee to ensure the seriousness and prudence of delisting decisions. The next step is to continuously improve the rules system, research and improve the issuance, listing, and information disclosure systems suitable for the characteristics of small and medium-sized enterprises, continue to optimize the market ecology of due diligence and benign interaction, focus on improving the investment and financing functions and market vitality of the Beijing Stock Exchange, and better serve the construction of a new development pattern and high-quality economic development.

Overall, the construction of the institutional system of the Beijing Stock Exchange will be conducive to China, especially the ancient capital of Beijing, as a political and cultural center, better serving innovative small and medium-sized enterprises in the capital market to expand the path of inclusive finance; Of course, how to gradually enhance the liquidity of listed companies on the Beijing Stock Exchange in the future, and whether it will lower the investor threshold of the Beijing Stock Exchange in the future (Note: Currently, the investor "threshold" for the selected layer, innovation layer, and basic layer of the New Third Board are: 1 million, 1.5 million, and 2 million yuan respectively), so that more investors can participate, it is still necessary to continuously evaluate the market operation based on the construction, development, and needs of the Beijing Stock Exchange, Continuously improve the investor suitability management system. Careful study of the draft for comments on relevant rules and regulations, and timely tracking of the establishment and revision of rules and regulations will be beneficial for small and medium-sized enterprises and service institutions to better utilize the Beijing Stock Exchange to improve the quality of listed companies and future market development. Regarding the legal impact of the relevant new regulations and amendments, please also contact the author and lawyer Gao Peng for further explanation.

The future has come, let's go hand in hand!

(This article is translated by software translator for reference only.)