Underwriting and distribution of national and financial bond in inter-bank market

The underwriting of government loan and financial bond refers to the participation in issuance of government bond and financial bond by financial institutions as members of the underwriter syndicate. The government bond herein refers to book-entry treasure bond, which is in circulation in inter-bank market, stock exchange market and bank’s over the counter market. Financial bond refers to policy finance bond, issued and circulating in inter-bank market. Bond issuance refers to the process of issuance of bonds by relevant organizations. The current issuance of bonds in China is realized through direct issuance from issuance institutions to primary underwriter who will distribute its awarded bonds to other participants in the market. Issuance and distribution of bonds constitute primary bond market. The primary underwriter refers to the institution with good credit condition, which is determined by an issuance institution according to the bond issuance condition of last year. Only such underwriter may offer a bid during the issuance of bond by that issuance institution. Other market participants who intend to obtain the bonds of that issuance institution shall purchase from primary underwriter. Distribution of bonds is the important guarantee for a financial institution to successfully participate the issuance of bonds. It refers to the transfer of bond ownership by a primary underwriter to other market participants in the bond distribution period. The distribution of bonds in inter-bank market is classified into intentional distribution and actual distribution.

The Funding Center facilitates the primary underwriter in bond distribution and other financial institutions in purchase of new bonds through the bond distribution function of the transaction system.

There is no transfer of capital or bonds in the intentional distribution. Therefore no settlement of capital or bonds is needed. In actual distribution, the settlement of capital and bonds shall be determined by the content of trade ticket and the specific requirements and procedures will be the same as that of the transaction of purchase and sale of bonds.