Recently, the Shanghai and Shenzhen stock exchanges simultaneously released a draft for public comment on new regulations, aiming to classify and clarify the delisting situations and procedures for certain LOF (Listed Open-End Funds). The implementation of this important institutional arrangement will effectively curb irrational speculation and protect the rights and interests of small and medium investors.
In recent years, some LOF products have been constrained by objective bottlenecks such as futures position limits and QDII foreign exchange quotas, resulting in frequent restrictions on subscriptions and redemptions, which easily triggers high premium speculation on the market. The introduction of the new regulations is precisely to address this issue through mechanisms, paving the way for high-quality development of the public fund industry.
| Four core measures of the new regulations: Precisely cracking down on the chaos of "high premiums."
In response to the problems exposed by LOF funds in recent years, the Shanghai and Shenzhen Stock Exchange's "Notice" clarifies four core measures, aiming to address the risks of high premium speculation through mechanisms:
Clarification of delisting conditions: QDII LOF and small-scale LOFs with net asset value below 10 million yuan on the exchange for 60 consecutive trading days should be delisted. Transition period: For specific products like QDII LOF, a transition period of over one year has been set, with listing to be terminated by the end of 2027 at the latest, giving the market a buffer period. Standardizing delisting procedures: The specific procedures for delisting have been refined to ensure orderly delisting. Strengthen risk warnings: require fund companies and brokerages to increase information disclosure, provide daily risk alerts for LOFs that have touched the delisting warning line, and guide investors to trade rationally.
Delisting ≠ Liquidation: Investors need not panic
The new regulations specifically emphasize that the termination of LOF listing does not mean the fund is liquidated, and the actual impact on the market and investors is very limited: Fund operations as usual: Delisting does not involve net selling of stocks or other underlying assets, and does not affect the fund's normal investment operations. Off-exchange subscription and redemption remain unaffected: Subscription and redemption business for off-exchange fund unit holders remains completely unaffected. On-exchange shares have a way out: On-exchange holders can transfer their shares to off-exchange during the transition period, or redeem or sell them directly through on-exchange channels. After delisting, they can still redeem normally through off-exchange consignment channels.
Since its launch in 2004, LOF (Listed Open-End Fund) has provided investors with dual convenience for on-exchange trading and off-exchange subscriptions and redemptions. However, as the market developed, its mechanism shortcomings gradually became apparent, mainly concentrated in two categories of products:
QDII and Commodity Futures LOF: Due to insufficient foreign exchange quotas or restrictions on futures positions and opening positions, these products are often forced to suspend or restrict subscriptions. Because it was impossible to buy outside the market, a large amount of capital rushed into the market to grab shares, easily triggering severe high premiums on the market.
Small-scale LOF: Some LOF are extremely small in scale and lack liquidity, so a small amount of capital can pull them to the daily limit, posing a risk of high premiums from malicious speculation in the short term.
What is a "high premium"? What risks do investors face?
A high premium, simply put, means investors buy shares in the secondary market (on-exchange) at a price far above the fund's actual net asset value. Once market sentiment fades or arbitrage funds enter the market, the premium rate falls, and investors face a "double blow": they bear the risk of underlying asset volatility and direct losses caused by trading prices returning to net asset value.
The introduction of the new regulations is precisely to curb such irrational speculation and effectively protect the legitimate rights and interests of small and medium investors.
| Three core measures of the new regulations: precise delisting, classified transition, and full-process early warning
To thoroughly resolve the high premium speculation problem of some LOF (Interest Forwards) from a mechanical perspective, the Shanghai and Shenzhen exchanges have established executable and predictable delisting standards and procedures. The core content of the new regulations can be simply summarized as the following three points:
1. Set a "delisting red line," requiring three types of products to exit the market
The new regulations adhere to a problem-oriented approach and clarify the threshold for mandatory delisting:
Commodity futures LOF and QDII LOF: Due to objective restrictions, they are prone to speculation and should be terminated. Small-scale LOF: If the net asset value on the market is below 10 million yuan for 60 consecutive trading days, the listing should also be terminated.
2. Set differentiated "transition periods" to allow ample buffer time
Based on the characteristics of different products, the new regulations adopt a classification approach:
QDII and Commodity Futures LOF: Considering the large number of holders, a transition period of over one year has been set, with listing to be terminated no later than December 31, 2027. Small-scale LOF: No transition period set. From the date the rules take effect, as long as the net asset value falls below 10 million yuan for 60 consecutive trading days, the delisting procedure will be directly initiated.
3. Strengthen "risk warnings" to comprehensively protect investors
The new regulations require that fund companies and securities firms hold firms accountable, and that investors "clear mines" throughout the entire delisting process:
Exclusive "*" mark: During the delisting transition period, QDII and commodity futures LOF will uniformly have an "*" mark before their on-exchange abbreviations, making it easier for investors to quickly identify risks. Daily "warnings": If small-scale LOF reaches a net value below 10 million yuan for 40 consecutive trading days, the fund company must issue daily risk warnings starting from the next trading day until the situation is resolved. Smooth exit channels: At critical delisting moments, fund managers must clearly remind investors to handle shares through on-exchange selling, redemption, or transferring shares off-exchange across systems. At the same time, brokerages must guide clients to trade rationally through multiple channels.
| Market Impact Assessment: Overall Scale Is Limited, Do Not Blindly "Speculate and Withdraw"
Regarding the withdrawal of some LOF, investors are most concerned about their impact on the market. Overall, the impact of these new regulations is very limited, so investors need not panic excessively.
According to industry insiders' estimates, about 125 LOFs may be involved in delisting this time, with a total market size of approximately 26 billion yuan. Among them, about 91 are truly "mini" small-scale LOFs, with a total on-site scale of only about 300 million yuan. In terms of quantity and scale, the overall impact is very limited and will not impact the A-share market.
In response to these new regulations, industry insiders have issued clear risk warnings to investors: do not blindly "speculate on withdrawals": abandon the habitual mindset of "speculating on poor performance" or "speculation on withdrawal," and never participate in speculation just because you see an "*" mark or delisting notice.
Kingtech Perspective | LOF "Normalized Delisting" Implementation
The new regulations clarify the mandatory delisting paths for QDII, commodity futures, and mini LOF funds, marking the official closure of the "survival of the fittest" mechanism in the on-exchange fund market. In the past, some funds exploited loopholes in LOF subscription and redemption restrictions to create "high premiums" that deviate from net asset value within the market. The new regulations use "*" markings as warnings, daily risk warnings, and a clear delisting schedule to completely cut off speculative funds' speculative logic. This means that the investment logic of on-exchange funds will completely shift from "speculating on capital sentiment" to "anchoring the value of underlying assets."
Beware of "premium traps" and decisively "transfer custody" or "cash out at high prices" For
investors currently holding high-premium LOFs (especially those marked with "*" or scale close to the 10 million red line), the top priority now is "hedging" rather than "bottom-fishing."
It is recommended to decisively use on-exchange liquidity to sell at high prices during the transition period, or transfer shares off-exchange through "transfer custody" to redeem shares at net asset value. Avoid taking chances; once the delisting channel opens and the premium falls, investors who bought at a high premium will face real principal losses.
Following the trend of "top concentration," embracing high-liquidity ETFs and core LOF
As mini funds and easily speculative stocks gradually retire, on-exchange funds will accelerate their concentration of large-scale, liquidity, and well-regulated leading products.
In terms of asset allocation, investors are advised to follow this trend and shift their focus from "easily manipulated small-cap LOFs" to "broad-based ETFs," "industry-leading ETFs," and mainstream equity-type LOFs. These products not only offer excellent on-exchange liquidity but also have transparent underlying assets, making them the absolute main force for future on-exchange instrumental investments.
