Third Board Reforms to Kill 95 pc of Companies?

China Daily: New Third Board confirms two-way division
The rules will divide the NEEQ market, better known as the New Third Board, into two segments-the innovative market and the basic market.

The China Securities Regulatory Commission issued a draft regulation in March to solicit public opinion.

The division will be based on a set of indicators of financial performance and shareholding structure of the listed companies, to ensure the relevant regulation is appropriately applied to them.

Analysts said the much-anticipated market division will allow the board to meet the different financing needs of companies, improve regulatory efficiency and reduce the cost of information collection for investors.
Reuters: China to allow qualified financial firms to list on New Third Board
China's securities regulator said on Friday it would resume listings by qualified financial institutions and private equity firms on the country's over-the-counter (OTC) New Third Board, part of efforts to fund innovation and stimulate growth.

The China Securities Regulatory Commission (CSRC) also said on its official microblog that hedge funds would be allowed to act as market makers on the board. Previously, only brokerages could act as market makers there.
This Chinese article asks if new reforms will kill 95 percent of listed firms on the Third Board.

iFeng: 新三板分层:大利好还是95%公司将被宣布死刑?
"Measures" clear stratification criteria, the following conditions are one of the listed companies to enter innovation layer: First, the last two years of continuous profitability, and the average annual net profit of less than 20 million yuan (around deducting non-recurring lower were calculated on the basis); the last two years the weighted average rate of return on average net assets of not less than 10% (calculated on the basis of the lower of deducting non-recurring gains and losses before and after).

Second, the continuous growth in recent years revenue and compound annual growth rate of not less than 50%; the last two years the average operating income of not less than 40 million yuan; the share capital of not less than 20 million shares.

Third, the recent deal-making transfer of 60-day average market capitalization not less than 600 million yuan; the most recent year end shareholders' equity of not less than 50 million yuan; market makers not less than 6 firms; not less than 50 qualified investors.

Third board stratification is a big plus or will 95 percent of the companies receive the death penalty?
Taking up the side that these changes are positive:
"Layered market system would provide useful information to improve the efficiency of resource allocation." Great Britain and the Securities Institute of Lida Xiao said. He believes that the system by a certain standard, the new three-panel business different levels of development, different sizes and different operating conditions to make screening for the implementation of differentiated institutional arrangements in preparation, will improve market efficiency of resource allocation.

Guotai Junan [0.00%] chief economist Lin Caiyi say, with respect to the rotation plate before difficult to achieve the target, the layer sprint innovation, better for the listed companies to establish a specific and detailed goal.

Implement tiered system for investors to reduce its screening, the cost of research investment targets. Stratified by listed companies will also understand their own conditions and other corporate equity background, carry out mergers and acquisitions or mergers of listed companies. For the market, will promote capital investment targets and reasonable match.

"At present, the ultimate goal of most of the listed companies are not IPO, but for efficient equity financing through such a platform." Financial Research Institute, Wuhan University, Dong Teng new view that the establishment of innovation level, began to regulate internal corporate governance, hierarchical The main purpose and meaning.

Financial Research Institute co-director Source Shenwan Hong Gui Haoming said that according to the current standard than the existing three new board to meet the requirements of the enterprise innovation level is probably more than 600, more than 10% of all enterprises in the new board.
Taking up the negative side is Hong Tai Fund Sheng Xitai:
Hong Tai Sheng Xitai Fund had published a long article, make a point: three new board simple layering, die!

Article ideas are as follows:

Engaged in the securities industry as a veteran of 20 years and a cross-border venture capital to early recruits, May 6 I saw the most reluctant to see a message: It is reported, the Commission has adopted May 4 the three new board stratification scheme will be implemented in May.

If the final report is confirmed, then history will remember this day - not because of the new board back to life, but because it was advanced morgue. I am sad that in the past 20 years, China's capital [0.00%] market and Internet entrepreneurs missed to connect the new board and the newly established China's venture capital market will be cut off, entrepreneurial era flood of export will also be blocked.

Why layering? The core issue is to solve the liquidity. Three new board does the most recent year in a liquidity panic. Although the number listed three new board is growing rapidly, as of May 6 have been 7033, an increase of nearly 2-fold, but the new three-panel market making index all the way down from the highest point in April 2015 of the 2673 points the past six months but it has been hovering around 1200 points. Over the past year, the daily turnover of 200 million yuan in long-term up and down. Throughout 2015, the Company had no transactions have 2895, accounting for more than 50%.

Three new board capital market as nothing more than two basic functions, is a Gaoqian is financing; second, the wealth effect, encourage entrepreneurs to gain wealth. There is no mobility, neither Gaoqian nor wealth accumulation, the core function of the capital market did not, which is the core issue.

Stratification can really solve the liquidity it? I am afraid that is a temporary solution, if only hierarchical, as a condition of several other major capital markets does not change - participants are still limited, is still the market maker system, it can not take the auction transaction, it is still not solve the problem. And hastily opened stratification may lead to a series of crisis, I am afraid many people do not realize.

Polarization, 95% of the company will be declared the death penalty

Program previously disclosed, the three new board layer and innovation into the base layer, may have access to only 5% of enterprise innovation layer. This means that 95% of the company because they can not enter innovations layer was sentenced to death. Liquidity is weak, if not hierarchical, most companies likely to die, may live, sustainable development will be a period of time might change for the better. Once stratified, equal to 5% to tell you is "good", while the remaining 95% of "junk."

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