TechFlow News, June 24: According to a report by the Shanghai Securities Journal, multiple private fund industry insiders revealed that they received notifications from their cooperating securities firms last night, instructing them to suspend new expansions of cross-border Total Return Swap (TRS) positions under fund managers’ oversight. Public sources indicate that TRS—short for Total Return Swap—is a financial derivative instrument enabling private funds to gain exposure to overseas assets’ returns (or losses) without directly holding those assets (i.e., principal remains in China), via entering into total return swap agreements with counterparty securities firms. Since the beginning of this year, buoyed by strong global technology sector performance, numerous private funds have allocated capital to overseas assets through cross-border TRS.
Since May, eight Chinese regulatory authorities—including the China Securities Regulatory Commission (CSRC)—jointly issued the “Implementation Plan for Comprehensive Rectification of Illegal Cross-Border Securities, Futures, and Fund Business Activities.” This initiative delivered stringent measures against leading cross-border internet brokers such as Tiger Brokers, Futu Holdings, and Longbridge Securities. As illegal cross-border stock trading by mainland residents has been curtailed, private fund products utilizing cross-border TRS to gain exposure to overseas technology stocks have drawn increasing investor attention.
