· Document Number：Announcement No. 29 [2016] of the People's Bank of China

· Area of Law： Negotiable Instruments

· Level of Authority： Departmental Regulatory Documents

· Date issued：12-05-2016

· Effective Date：12-05-2016

· Issuing Authority： People's Bank of China

· Status： Effective

Announcement of the People's Bank of China
(No. 29 [2016])
For purposes of regulating trading behavior on the negotiable instrument market, protecting the lawful rights and interests of all parties to transactions, and promoting the sound development of the negotiable instrument market, the People's Bank of China (“PBC”) has developed the Administrative Measures for Trading in Negotiable Instruments, which are hereby issued for implementation.
December 2016
Annex:
Administrative Measures for Trading in Negotiable Instruments
Chapter I General Provisions
Article 1 For purposes of regulating transactions on the negotiable instrument market, preventing trading risks, protecting the lawful rights and interests of all parties to transactions, and promoting the sound development of the negotiable instrument market, these Measures are developed in accordance with the Law of the People's Republic of China on the People's Bank of China, the Negotiable Instruments Law of the People's Republic of China, the Electronic Signature Law of the People's Republic of China, and other relevant laws and regulations.
Article 2 Market participants that trade in negotiable instruments shall abide by these Measures. For the purpose of these Measures, “negotiable instruments” shall include but not be limited to banks' acceptance bills, commercial acceptance bills and other tradable negotiable instruments in paper or electronic form.
Article 3 Trading in negotiable instruments shall observe the principles of fairness and voluntariness, good faith and self-discipline, and self-assumption of risks.
Article 4 The PBC shall conduct supervision and administration of the negotiable instrument market in accordance with the law, and conduct macro-prudential administration of the negotiable instrument market according to macro control requirements.
Chapter II Negotiable Instrument Market Participants
Article 5 “Negotiable instrument market participants” means the market participants that may trade in negotiable instruments, including:
(1) Corporate participants. “Corporate participants” means the corporate bodies of financial institutions, including policy banks, commercial banks and branch offices authorized by them, rural credit cooperatives, finance companies of enterprise groups, trust companies, securities companies, fund management companies, futures companies, insurance companies and other financial institutions approved by financial regulatory authorities.
(2) Non-corporate participants. “Non-corporate participants” means all kinds of investment products established by financial institutions as asset management institutions in the asset management business conducted according to investment plans and methods agreed upon with clients upon clients' entrustment or authorization, under the premise of compliance with laws and regulations, including securities investment funds, asset management plans, banks' wealth management products, trust plans, insurance products, housing provident funds, social security funds, enterprise annuities, and pension funds, among others.
(3) Other market participants determined by the PBC.
Article 6 A corporate participant shall meet the following conditions:
(1) It is formed in accordance with laws and regulations.
(2) It has developed internal management rules and operating procedures for the negotiable instrument business, and has a sound corporate governance structure and sound internal control and risk management mechanisms.
(3) It has personnel who are familiar with the negotiable instrument market and specialized in trade in negotiable instruments.
(4) It has corresponding risk recognition and assumption capability, and knows and assumes negotiable instrument investment risks.
(5) It meets other conditions required by the PBC.
Article 7 A non-corporate participant shall meet the following conditions:
(1) The products comply with the relevant laws, regulations and regulatory provisions, and have obtained the approval of or completed recordation at the relevant financial regulatory department in accordance with the law.
(2) The products have been entrusted to a financial institution qualified for custodianship (hereinafter referred to as the “custodian”) to conduct independent custody, and the custodian conducts separated account management and independent accounting for the principals' funds.
(3) The product management institution is qualified for conducting the asset management business approved by the relevant financial regulatory department.
Article 8 A corporate participant that trades in negotiable instruments shall abide by relevant laws and regulations, strengthen the building of internal control rules, improve department and post setup, and take effective measures to continuously enhance the business capability of relevant personnel.
Article 9 Where a non-corporate participant trades in negotiable instruments, the asset management institution shall exercise rights on negotiable instruments on behalf thereof, and assume corresponding civil liability with the assets managed upon entrustment. The department of the asset management institution that engages in asset management, posts, personnel and the assets managed by them shall be mutually independent from their own proprietary businesses.
Chapter III Negotiable Instrument Market Infrastructure
Article 10 “Negotiable instrument market infrastructure” means the institutions that provide the services of trading in negotiable instruments, registration and custody, liquidation and settlement, and information services.
Article 11 Negotiable instrument market infrastructure shall be recognized by the PBC. The PBC shall conduct the supervision and administration of negotiable instrument-related businesses conducted by the negotiable instrument market infrastructure.
Article 12 Negotiable instrument market infrastructure may provide the following services to market participants:
(1) Organizing trading in negotiable instruments, and releasing the real-time quotations on trading in negotiable instruments.
(2) Negotiable instrument registration and custody.
(3) Liquidation and settlement of trading in negotiable instruments.
(4) Negotiable instrument information services.
(5) Other services recognized by the PBC.
Article 13 Negotiable instrument market infrastructure shall conduct system construction and management according to the standards relating to the construction of financial market infrastructure.
Article 14 Negotiable instrument market infrastructure shall withdraw a certain proportion of its business income to set the risk fund and deposit it in the special account of the opening bank to cover the relevant loss caused by default delivery, technical failure, operation failure and force majuere, among others.
Article 15 Shanghai Negotiable Instrument Exchange is the institution designated by the PBC to provide the services of trading in negotiable instruments, registration and custody, liquidation and settlement, and information services.
Chapter IV Registration and Electronization of Negotiable Instrument Information
Article 16 Before the discount of paper bills, a financial institution that handles acceptance, pledge, guarantee and other businesses shall complete relevant information registration through the negotiable instrument market infrastructure on the working day immediately after business handling.
After the acceptance of paper commercial acceptance bills, the opening bank of the acceptor shall register acceptance information on behalf of the acceptor based on the entrustment thereof. If the acceptance information is not registered in a timely manner, the holder has the right to require the acceptor to supplement the acceptance information.
If the information on paper bills is inconsistent with the registered information, the information on paper bills shall prevail.
Article 17 When the applicant for a discount handles the discount of paper bills, it shall consult the bill acceptance information through the negotiable instrument market infrastructure, and after confirming that the matters that must be recorded on paper bills are consistent with registered acceptance information, then the discount shall be handled for the applicant, and the applicant is not required to provide the contract, invoice and other materials; and if the information does not exist or the matters that must be recorded on paper bills are inconsistent with registered acceptance information, discount is not allowed.
For the purpose of this paragraph, “matters that must be recorded in paper bills” means the matters that must be recorded in bills as prescribed in Article 22 of the Negotiable Instruments Law of the People's Republic of China.
Article 18 The applicant for a discount shall, after completing the discount of paper bills, complete the registration of discount information through the negotiable instrument market infrastructure no later than the working day immediately after the date of discount.
Article 19 Where the acceptor or the opening bank of the acceptor receives the stop-payment notice or declaration of claims and other judicial documents and confirms that no payment is made for the relevant bills, it shall suspend payment on the current day in accordance with the law and register the relevant information through the negotiable instrument market infrastructure, or authorize the opening bank to register the relevant information through the negotiable instrument market infrastructure.
Article 20 Where a financial institution registers the relevant business information through the negotiable instrument market infrastructure, and causes any loss to any other person due to the registration of erroneous information, it shall assume the compensatory liability.
Article 21 The applicant for a discount shall, after handling the discount of paper bills, record “ownership has been registered in an electronic manner” on the bills, and no endorsement transfer, pledge or any other transaction shall be conducted on such bills in a paper form. The applicant for a discount shall appropriately retain paper bills.
Article 22 Discounted bills shall be endorsed through electronic forms. “Endorsement in electronic forms” shall refer to the endorsement recorded through the negotiable instrument market infrastructure in the form of data message, and it has equal legal force with paper endorsement.
Article 23 After paper bills are endorsed in an electronic form, the holder of rights on the bills shall complete delivery by the method that the negotiable instrument market infrastructure notifies the custodian to modify the depositor.
Article 24 The applicant for a discount may choose a commercial bank to guarantee the credit enhancement of paper bills under the market-orientation principle.
The bank that guarantees credit enhancement shall take into custody paper bills and make advance repayment for the repayment responsibility of the applicant for a discount.
Article 25 The endorsement transfer, pledge, guarantee, and presentation for payment of discounted bills and other businesses on bills shall be handled through the negotiable instrument market infrastructure.
Article 26 After the discount of paper bills, the custodian may send a payment confirmation to the acceptor. The payment may be confirmed by physical confirmation or image confirmation.
“Physical confirmation” means that the custodian of bills serves physical bills upon the acceptor or the opening bank of the acceptor, and the acceptor confirms the responsibility of payment upon maturity on the basis of examining the authenticity of bills and continuity of endorsements.
“Image confirmation” means that the custodian of bills serves the image information on bills upon the acceptor or the opening bank of the acceptor, and the acceptor confirms the responsibility of payment upon maturity on the basis of examining the acceptance information and continuity of endorsements.
Where the acceptor requires physical confirmation, the custodian of banks' acceptance bills shall serve bills upon the acceptor, and after physical confirmation, paper bills shall be appropriately preserved by the acceptor on behalf of the holder of rights on bills, and the custodian of commercial acceptance bills shall serve bills upon the acceptor through the opening bank of the acceptor and conduct physical confirmation, and after physical confirmation, paper bills shall be appropriately preserved by the opening bank of commercial acceptance bills on behalf of the holder of rights on bills.
Article 27 Physical confirmation and image confirmation shall have equal effect. After the acceptor or the opening bank of the acceptor confirms payment, payment shall be made after the holder makes a presentation of payment except stop-payment, declaration of claims or any other legal defense circumstance.
Article 28 The acceptor shall, after receiving the request for the image or physical confirmation of bills, give or authorize its opening bank to give the reply of approving or refusing to make payment upon maturity within three working days. If the acceptor refuses to make payment upon maturity, it shall explain the reason.
Article 29 The custodian of bills shall take effective measures to guarantee that paper bills are not misappropriated, damaged, altered, destroyed or lost, and assume the relevant legal liability for the inappropriate custody of bills.
Article 30 The information on the issuance, acceptance, pledge, guarantee, and discount, among others, of electronic commercial bills shall be transmitted to the negotiable instrument market infrastructure simultaneously through the electronic commercial bill system.
Article 31 Once electronic commercial bills are accepted, it shall be deemed that the acceptor has made payment confirmation.
Chapter V Registration and Custody of Negotiable Instruments
Article 32 “Registration of negotiable instruments” means that a financial institution records the ownership of negotiable instruments in the electronic bookkeeping system of the negotiable instrument market infrastructure.
Article 33 “Custody of negotiable instruments” means that the negotiable instrument market infrastructure manages and maintains the rights and interests relating to the negotiable instruments held by the holders of rights on negotiable instruments.
Article 34 Market participants shall open the custody accounts of negotiable instruments on the negotiable instrument market infrastructure.
When a market participant opens a custody account of negotiable instruments, it shall file an application with the negotiable instrument market infrastructure, and guarantee that the opening materials submitted are true, accurate and complete.
Article 35 The real-name system shall be adopted for the custody accounts of negotiable instruments, and the accounts may not be leased, lent or transferred.
Article 36 One market participant may only open one custody account of negotiable instruments, unless it is otherwise prescribed by the PBC.
A corporate market participant shall open a custody account of negotiable instruments in the name of a legal person. A branch office authorized by a legal person shall open a custody account of negotiable instruments in the name of the branch office; and non-corporate market participants shall independently open custody accounts of negotiable instruments in the name of products.
Article 37 The applicant for a discount shall, before trading in negotiable instruments, complete the registration of paper negotiable instruments through the negotiable instrument market infrastructure, guarantee that the information on the registration of negotiable instruments submitted by them are true and valid, and assume the corresponding legal liability.
Article 38 The negotiable instrument market infrastructure shall complete the registration of electronic negotiable instruments for holders based on the information on the electronic commercial bill system.
Article 39 Where the balance of the custody account of negotiable instruments is changed due to the trade transfer or non-trade transfer of negotiable instruments, the negotiable instrument market infrastructure shall handle modification registration of negotiable instruments for the right holder.
Chapter VI Trading in Negotiable Instruments
Article 40 Negotiable instruments shall be traded through the negotiable instrument market infrastructure by the national uniform operation management mode.
Article 41 Trading in negotiable instruments includes inter-bank discount, collateral repos and buyout repos, among others.
“Inter-bank discount” means the transactions in which the seller transfers un-matured discounted bills to the buyer.
“Collateral repos” means that when the repurchase party pledges bills to the reverse repurchase party to borrow funds, both parties agree that the repurchase party shall return funds of agreed amount to the reverse repurchase party on a certain date in the future, and the reverse repurchase party returns pledged bills to the repurchase party.
“Buyout repos” means that when the repurchase party sells bills to the reverse repurchase party, both parties agree that the repurchase party purchases bills at the agreed price from the reverse repurchase party on a certain date in the future.
Article 42 Market participants may conduct transactions after completing the registration of bills, or conduct transactions after payment confirmation and guarantee of credit enhancement. The applicant for a discount that applies for the guarantee of credit enhancement shall complete credit enhancement before the first transaction.
Article 43 Bills shall be repaid according to the following sequence after their maturity:
(1) The applicant for a discount shall make advance repayment if the acceptor fails to make payment, provided that bills are traded without the acceptor's payment confirmation and guarantee of credit enhancement. If the acceptor confirms payment after trading in the bills, the acceptor shall make payment; and if the acceptor fails to make payment, the applicant for a discount shall make repayment in advance.
(2) Where bills are traded after the acceptor confirms payment without guaranteeing credit enhancement, the acceptor shall make payment; and if the acceptor fails to make payment, the applicant for a discount shall make repayment in advance.
(3) Where bills are traded after the acceptor guarantees credit enhancement without payment confirmation, if the acceptor fails to make payment, the bank which guarantees credit enhancement shall make advance repayment; and if the bank fails to do so, the applicant for a discount shall make advance repayment.
(4) Where the acceptor guarantees credit enhancement and confirms payment, the acceptor shall make payment. If the acceptor fails to make payment, the bank which guarantees credit enhancement shall make advance repayment; and if the aforesaid bank fails to do so, the applicant for a discount shall make advance repayment.
Article 44 Negotiable instruments shall be traded through the negotiable instrument market infrastructure and trading records shall be made. Trading records shall be explicitly agreed upon based on transaction dates, trading varieties, trading interest rates and other factors.
Negotiable instrument trading records, master agreement and supplementary agreement (if any) constitute the complete trading contract of both parties to transactions.
Once a negotiable instrument trading contract is established, both parties to the transaction shall diligently implement the contract, and shall not modify or rescind the contract without approval.
Article 45 The photocopies of the inter-bank discount certificate and discount certificate, inquiry reply, photocopies of negotiable instruments and other paper materials are not required to be provided for trading in negotiable instruments.
Article 46 The time limit for discount and inter-bank discount of negotiable instruments shall last from the date of discount and inter-bank discount, and shall be postponed to the next working day in case the date of maturity is a statutory holiday.
Article 47 The shortest term of collateral repos and buyout repos is one day, and shall be less than the remaining term of negotiable instruments.
Article 48 The amount of collateral repos shall not exceed the amount of pledged negotiable instruments.
Chapter VII Settlement of Trading in Negotiable Instruments and Handling upon Maturity
Article 49 The settlement of trading in negotiable instruments shall be conducted through the electronic bookkeeping system of negotiable instrument market infrastructure, including delivery versus payment and delivery of negotiable instruments.
“Delivery versus payment” means the form of settlement whereby the delivery of negotiable instruments and payment of funds are completed simultaneously by both parties to the settlement and set as a mutual condition.
“Delivery of negotiable instruments” means the mode of settlement in which the delivery of negotiable instruments of both parties to the settlement and payment of funds are independent from each other.
Article 50 Market participants that trade in negotiable instruments shall adopt delivery versus payment, and the delivery of negotiable instruments may be adopted for trading in negotiable instruments among the branch offices of the same legal person.
Article 51 A market participant that has opened a clearing account in the High Value Payment System shall handle the settlement of funds in the form of delivery versus payment through its clearing account in the High Value Payment System.
A market participant that has not opened a clearing account in the High Value Payment System shall entrust the negotiable instrument market infrastructure with the handling the settlement of funds in the form of delivery versus payment.
Article 52 The negotiable instrument market infrastructure shall handle the settlement of funds as the agent in the form of delivery versus payment through its clearing account in the High Value Payment System. The negotiable instrument market infrastructure shall, under the account, open the special account of negotiable instrument settlement funds for market participants which entrust it with the settlement of funds as the agent.
Article 53 Both parties to the transaction shall, as agreed upon in the contract, ensure that they have sufficient amount of negotiable instruments and funds on the agreed date of settlement.
Article 54 Before the completion of settlement after trading in negotiable instruments is concluded, negotiable instruments, funds or guarantees under the transaction shall not be used.
Article 55 In the handling of non-trade delivery of negotiable instruments such as the court's compulsory execution, taxation, succession of claims and debts, and donation, among others, the negotiable instrument market infrastructure shall require the parties to submit legal and valid legal documents.
Article 56 Where the holder gives a presentation for payment through the negotiable instrument market infrastructure during the period of presentation for payment, the acceptor shall give a reply or authorize its opening bank to give a reply on the date of presentation for payment.
Where the acceptor refuses to make payment under any statutory cause of defense, it shall, on the date of presentation for payment, issue or authorize its opening bank to issue the payment rejection certificate, and notify the holder through the negotiable instrument market infrastructure.
Where the acceptor or the opening bank of the acceptor fails to give a reply on the date of presentation for payment, it shall be deemed that it refuses to make payment, the negotiable instrument market infrastructure shall provide a payment rejection certificate and notify the holder.
Article 57 Where the acceptor of commercial acceptance bills agrees to make payment on the date of presentation for payment, the opening bank of the acceptor shall handle according to the balance of the acceptor's account.
(1) Where the balance of the acceptor's account is sufficient to make payment for the bill, the opening bank of the acceptor shall give a reply on approval to make payment on behalf of the acceptor, and make payment to the holder on the date of presentation for payment.
(2) Where the balance in the acceptor's account is insufficient to make payment for the bill, it shall be deemed that the acceptor refuses to make payment. The opening bank of the acceptor shall give a reply on refusal to make payment on behalf of the acceptor on the date of presentation for payment and explain the reason, and notify the holder through the negotiable instrument market infrastructure at the same time.
Article 58 Where the acceptor of a bank's acceptance bills has confirmed payment before the date of maturity, the negotiable instrument market infrastructure shall, according to the entrustment of the acceptor, send orders to transfer funds to the fund account of the holder on behalf of the acceptor on the date of presentation for payment.
Where the acceptor of commercial acceptance bills has confirmed payment before the date of maturity, the opening bank of the acceptor shall, based on the entrustment of the acceptor, transfer funds in the acceptor's account on the date of presentation for payment, and transfer corresponding funds to the holder's fund account.
Article 59 When the bank guaranteeing credit enhancement or the applicant for a discount assumes the repayment responsibility, it shall authorize the negotiable instrument market infrastructure to send orders to transfer funds to the holder's fund account on its behalf.
Article 60 After the acceptor or the drawer makes payment, the negotiable instrument custodian shall take into custody negotiable instruments by reference to the requirements for taking into custody accounting archives. If the acceptor conducts image confirmation and makes payment, it may take the notice of presentation for payment and money transfer notice of the negotiable instrument market infrastructure and retained sheet of negotiable instruments as accounting vouchers.
Article 61 Where any legal dispute on negotiable instruments occurs, upon the request of the applicant, the negotiable instrument market infrastructure shall issue records on the registration, custody and trading circulation of negotiable instruments. The custodian of negotiable instruments shall provide the corresponding physical negotiable instruments.
Chapter VIII Supplementary Provisions
Article 62 The business rules on negotiable instrument market infrastructure shall be developed in accordance with these Measures and relevant provisions of the PBC, and be implemented after being reported to the PBC for approval.
Article 63 In the case of any discrepancy between these Measures and any relevant provisions developed before these Measures come into force, these Measures shall prevail.
Article 64 These Measures shall be subject to interpretation by the PBC.
Article 65 These Measures shall come into force on the date of issuance, the Notice of the General Office of the People's Bank of China on Making Good Preparations for the Access to the Negotiable Instrument Trading Platform (No. 224 [2016], PBC) shall apply during the transitional period.