CSRC Clampdown on Use of Derivative Transactions for Regulatory Avoidance

In April 2024, the China Securities Regulatory Commission (“CSRC”) published its ruling on an enforcement case involving a series of derivatives transactions in relation to the shares of CNNC Huayuan Titanium Dioxide Co., Ltd (中核华原钛白股份有限公司).  The CSRC appears to be adopting a see-through approach when enforcing regulations, looking at the substance and economic realities over the form of the transactions. This bulletin considers the salient aspects of the CSRC ruling, the wider context of impending CSRC measures on OTC derivatives, and the potential impact on the market and transactions generally.