New OTC exchange opens in Qianhai

The Qianhai Equity Exchange (QEE), a regional over-the-counter (OTC) exchange, conducted its first day of trading Thursday with over 1,200 companies under its wings, a figure which makes it the largest OTC platform in the Chinese mainland in terms of listings.

As the latest addition to the country's OTC landscape, the Shenzhen-based exchange is designed to open a new financing channel for non-listed small- and medium-sized enterprises (SMEs). But unlike stock exchanges in Shanghai and Shenzhen, listing on the QEE does not necessarily enable businesses to immediately obtain funding - instead participating companies post information concerning their operations and their financial results on the QEE's website for review by investors. Based on its disclosures, capital holders can decide whether to purchase a company's bonds or shares, according to information from the exchange.

Companies planning to join the exchange must have earned at least 3 million yuan ($489,411) in profits or 20 million yuan in revenue over the preceding 12 months, the exchange mentioned among the listing criteria it posted online.

For its listed members, the exchange offers an array of services including share custody, capital raising, trading and settlement. Having just officially opened though, the exchange is now only helping companies obtain financing through debt securities and other fixed-income products. Equity financing services will start at a later date, the exchange said.

Though the QEE boasts a multitude of listings compared to the New Third Board - China's national OTC market, which officially hosts seven companies following a regulatory shake-up Tuesday - it will be hard to predict the exchange's long-term success, Qian Qimin, deputy head of market research at Shenyin & Wanguo Securities, told the Global Times.

"Relative to the New Third Board, regional equity exchanges are less attractive, because in practice it is almost impossible for companies to raise capital there," Qian remarked. "But now the New Third Board is open only to non-listed high-technology firms, which may explain the quick development seen at other exchanges."

After securities regulators released guidelines pertaining to regional equity exchanges in 2012, several local governments - including those in Shanghai, Zhejiang Province and Jiangsu Province - opened such exchanges of their own.

"These markets may lack appeal after the New Third Board expands," Qian speculated.

Since the debut of the SME share transfer system - which functions as the trading platform for the New Third Board - in January, the market has been anticipating the board's eventual expansion.