Shanghai and Shenzhen stock exchanges released a consultation paper on August 7, seeking public feedback on proposals to overhaul the delisting framework for listed open-ended funds (LOFs).
The draft rules specify that commodity futures LOFs and QDII LOFs must be delisted, with a transition period of at least one year, setting a final deadline of December 31, 2027, for their removal from the market. Additionally, any LOF whose on-exchange net asset value remains below 10 million yuan for 60 consecutive trading days will also be subject to mandatory delisting.
If an LOF's daily on-exchange net asset value stays below 10 million yuan for 40 consecutive trading days, the fund manager must report the situation to the exchange and disclose a risk warning notice before the market opens on the next trading day. This warning must be repeated every trading day thereafter until the condition is resolved or a delisting scenario materializes, whichever occurs first.
Shanghai Stock Exchange Delisting Rules
The Shanghai Stock Exchange formally drafted its notice, defining specific scenarios as "other circumstances that the exchange deems should result in delisting" under Article 33, Item 5 of its fund listing rules. The first scenario covers QDII LOFs, which are funds established under relevant regulations to invest a portion or all of their assets in overseas securities markets. The second scenario applies to any LOF whose on-exchange net asset value stays below 10 million yuan for 60 consecutive trading days, with the count starting from the notice's implementation date.
QDII LOFs must be delisted by December 31, 2027, at the latest. From the notice's implementation date until delisting, these funds will have an asterisk (*) added to the beginning of their on-exchange short names. Fund managers are required to disclose a risk warning announcement before the market opens on the implementation date, alerting investors to the upcoming delisting and reminding them to redeem, sell, or transfer their on-exchange shares to off-exchange accounts via the cross-system transfer process. Fund managers must also finalize all delisting arrangements.
For LOFs seeking to convert into an off-exchange fund, the fund manager must establish a 20-trading-day investor selection period. During this period, subscription activities are suspended, but on-exchange trading, redemption, and cross-system transfers remain open. The manager must submit conversion documents and announce the plan three trading days before the selection period begins, specifying its duration, permissible business activities, and post-period arrangements. A daily delisting warning announcement must be issued throughout the selection period. After the period ends, all on-exchange trading, subscription, redemption, and transfer activities are suspended until the delisting date. The manager must file for delisting within five trading days after the selection period concludes.
For LOFs opting for liquidation and delisting, the fund manager must follow the procedures under the Securities Investment Fund Law, either by obtaining a resolution from the fund unit holders' meeting or by meeting the conditions for terminating the fund contract as stipulated in the fund agreement. The manager must designate a business suspension date, after which the fund enters the liquidation process, halting all on-exchange trading, subscription, redemption, and transfer activities until the delisting date. The manager must submit relevant documents to the exchange three trading days before the suspension date and issue a public announcement detailing the suspension date and subsequent delisting plan. Within five trading days after the liquidation funds are distributed, the manager must file for delisting.
If an LOF's on-exchange net asset value falls below 10 million yuan for 40 consecutive trading days, the fund manager must report to the exchange and disclose a risk warning before the next trading day's market open, repeating the warning daily until the condition is resolved or a delisting scenario occurs. Once the condition for mandatory delisting under the 60-day rule is triggered, the manager must announce the situation before the next trading day's market open and submit documents for conversion or liquidation. The LOF will be suspended from trading from the announcement date, and three trading days after the suspension begins, a 20-trading-day investor selection period or business suspension date will commence. During the selection period for conversion, on-exchange trading and subscriptions are suspended, but redemptions and cross-system transfers are allowed. After the selection period, all on-exchange activities are suspended until the delisting date. The exchange will make a delisting decision within ten trading days of receiving the required documents, and the LOF will be delisted within five trading days of that decision. The exchange will publish a delisting announcement on the delisting date.
If both delisting scenarios apply simultaneously, the exchange will apply the rule that is triggered first. Members of the exchange must include LOFs with delisting announcements in their key monitoring lists and issue risk warnings to clients through various channels. Fund managers must prepare for the delisting process, including establishing monitoring and early warning systems for on-exchange net asset values.
Shenzhen Stock Exchange Delisting Rules
The Shenzhen Stock Exchange's draft notice also defines specific delisting scenarios under Article 23, Item 5 of its fund listing rules. The first scenario covers commodity futures LOFs, which primarily track commodity futures prices or indices by holding contracts traded on exchanges approved by the China Securities Regulatory Commission, and QDII LOFs investing in overseas securities markets. The second scenario applies to any LOF with an on-exchange net asset value below 10 million yuan for 60 consecutive trading days, with the count starting from the notice's implementation date.
Commodity futures LOFs and QDII LOFs must be delisted by December 31, 2027, at the latest, with an asterisk (*) added to their on-exchange short names until delisting. Fund managers must disclose a risk warning before the market opens on the implementation date, reminding investors of the delisting risk and options to redeem, sell, or transfer shares off-exchange. If an LOF's on-exchange net asset value falls below 10 million yuan for 40 consecutive trading days, the manager must report to the exchange and disclose a risk warning before the next trading day's market open, repeating it daily until the condition is resolved or a delisting scenario occurs. Once the 60-day delisting condition is triggered, the manager must report to the exchange and announce it before the next trading day's market open, leading to immediate trading suspension. The manager must submit delisting documents within two trading days of the announcement.
The exchange will make a delisting decision within ten trading days of receiving the documents and notify the manager within two trading days of the decision. The manager must disclose the delisting announcement within two trading days of receiving the decision. For commodity futures and QDII LOFs, the manager must issue a daily delisting announcement for 20 consecutive trading days from the exchange's decision date, with the LOF delisting on the next trading day after the period ends. For LOFs delisted under the 60-day rule, the delisting occurs within five trading days of the decision. If both delisting scenarios apply, the rule triggered first will be applied. Fund managers must include details on how on-exchange shares can still be redeemed after delisting in their announcements. Exchange members must include these LOFs in key monitoring lists and issue risk warnings to clients. Fund managers must prepare for the delisting process, including establishing monitoring and early warning systems. The definition of "below" excludes the specific number itself, and consecutive trading days include days when the fund is suspended for the entire day.