Summary September 6 evening, the head of China Securities Regulatory Commission issued a statement to answer Xinhua News Agency reporters Wen Di and Xing Shi , said we should stabilize the market, market repair and construction markets combine. The person in charge said that the current stock market bubble and risk have been released to a considerable extent. In the future, when the market is fierce...
On the evening of September 6, the head of the China Securities Regulatory Commission issued a speech in the form of a Q&A reporter, saying that it is necessary to combine the stable market, the repair market and the construction market. The person in charge said that the current stock market bubble and risk have been released to a considerable extent. In the future, when the market is extremely volatile and may cause systemic risks, the securities company will continue to play a role in maintaining stability in various forms.

The person in charge of the China Securities Regulatory Commission said that the stock market has its own operating rules. Under normal circumstances, the government does not intervene. However, when the stock market experiences severe fluctuations and may cause systemic risks, the government will never sit idly by and will take various measures in a timely and decisive manner. Measures to stabilize the stock market.

A spokesperson of the China Securities Regulatory Commission said that it will take various measures to stabilize the stock market in a timely and decisive manner, actively and steadily implement the reform of the stock issuance system, and study and formulate an index fuse mechanism.

The CSRC stated that it is necessary to make up for regulatory loopholes and improve the market management system. Study and formulate the implementation of the index fuse mechanism program, strictly manage and limit the programmatic transactions, curb excessive speculation in stock index futures, and regulate the stock financing business. Standardize the business activities of securities companies, fund companies and futures companies, and improve the risk control indicator system.

[Science: Fuse mechanism]
It refers to a mechanism for setting a fuse price before a contract reaches the price limit, so that the contract purchase and sale price can only be traded within this price range for a certain period of time.

The following is the full text of the speech by the person in charge of the CSRC:
I. Q: How do you view the stock market volatility in the recent period?
A: The stock market is fluctuating, rising from time to time and falling from time to time. This is an inevitable phenomenon. However, in recent months, China's stock market has experienced abnormal fluctuations and experienced rapid changes and declines. In July 2014, the Shanghai Composite Index was at a minimum of 2033 points. It was affected by various factors and reached 5178 points on June 12, 2015, with a cumulative increase of 154%. The stock market has risen too fast and has a bubble, and the subsequent fall and adjustment is inevitable. However, the stock market has quickly fallen back and even panic down. Leveraged financing has accelerated after the increase, and some financial products have touched the stop-loss line. Forced liquidation, spot and futures markets fell interactively, market liquidity risk and financial systemic risk highlighted. Faced with this situation, all relevant parties have acted in concert and coordinated, and quickly and decisively adopted various measures to maintain the stability of the stock market and avoid possible systemic risks. At present, the stock market bubble and risk have been released to a considerable extent, market transactions are basically normal, liquidity is abundant, and the inherent stability of the market is enhanced.

Second, ask: How to understand the inherent stability of the market?
A: The so-called inherent stability of the market is mainly reflected in the following aspects:

First, the market valuation center has clearly moved down. As of September 2, compared with the previous high, the Shanghai Composite Index's P/E ratio has dropped from 25 times to 15.6 times. The price-earnings ratio of Shenzhen Composite Index has dropped from 70.1 times to 37.3 times. The P/E ratio of the GEM index has dropped from 134.5 times to 63.6 times.

Second, the risk of leveraged financing has been released to a considerable extent. Off-market fund-raising has been cleaned up and rectified. Among them, the three systems of Hang Seng Electronics, Ming Chuang and Tong Hua Shun, which have the largest amount of funds, have been closed down due to violations of laws and regulations. The balance of on-market financing of securities companies dropped sharply, from the previous peak of 2.27 trillion yuan, to about 1 trillion yuan, returning to the level at the end of last year. The scale of leveraged financing by trust companies has also fallen sharply.

Third, the regulatory factors that help increase and help fall are effectively suppressed. By increasing the margin and limiting the number of open positions, excessive speculation in stock index futures trading has been basically curbed. Strictly restricting programmatic transactions, stopping the frequent resignation of orders, and greatly reducing the effect of its help-up. Allowing financial institutions to optimize the mechanism and method of collateral default disposal, and extend the expiring contract, effectively alleviating the pressure on leveraged funds to close the position.

Fourth, investors are in good liquidity. Stock market transactions are basically smooth, and institutional investors such as fund companies, social security funds, insurance companies, enterprise annuities, and private equity funds have more funds available. The balance of personal customer transaction settlement funds reached 2.5 trillion yuan, much higher than the level of 1.2 trillion yuan at the end of last year.

3. Q: What is the intention of the CSRC in maintaining the stability of the stock market and reform and development in the next stage?
A: Next, we must continue to stabilize the market and prevent systemic risks as the primary task. We will combine the stable market, the repair market and the construction market, and focus on fostering an open, transparent, long-term, stable and healthy development of the capital market.

The rise and fall of the stock market has its own operating rules. Under normal circumstances, the government does not intervene. However, when the stock market experiences severe fluctuations and may cause systemic risks, the government will never sit idly by and take various measures to stabilize the stock market in a timely and decisive manner. In the previous stage, China Securities Finance Co., Ltd. entered the market to buy stocks, which played a positive role in maintaining stock market stability and preventing systemic risks. In the future, when the market is extremely volatile and may cause systemic risks, China Securities Finance Co., Ltd. will continue to play a role in maintaining stability in various forms.

This round of abnormal stock market volatility has further exposed China's stock market is immature, the system is not perfect, the regulation is not suitable, and the structure of listed companies and investors is unreasonable, and there are too many short-term speculations. To solve these problems, we must rely on deepening reforms, improving the legal system, and improving supervision. For the time being and for some time to come, we must do our best to:

First, we must proceed from China's reality, learn from the experience of overseas mature markets, study the top-level design of the market, adhere to the service of the real economy, improve the market structure, foster the development of institutional investors, and implement policies that encourage long-term investment.

Second, promote market reform and opening up in an orderly manner, adhere to the orientation of marketization and rule of law, actively and steadily implement the reform of the stock issuance registration system, focus on promoting the quality of listed companies, accelerate the market-oriented reform of mergers and acquisitions of listed companies, and regulate major shareholders and actual control. The people's share resale system promotes the construction of the share repurchase system of listed companies, conscientiously implements the dividend distribution system of listed companies, and optimizes the investor return mechanism.

Third, make up for regulatory loopholes and improve the market management system. Study and formulate the implementation of the index fuse mechanism program, strictly manage and limit the programmatic transactions, curb excessive speculation in stock index futures, and regulate the stock financing business. Standardize the business activities of securities companies, fund companies and futures companies, and improve the risk control indicator system.

Fourth, consolidate market infrastructure construction, strengthen management of various accounts and information systems, increase data integration and sharing, and establish and improve risk early warning systems and cross-market real-time monitoring systems.

Q: What has the CSRC done in the past period to investigate and deal with violations of laws and regulations?
A: Since April this year, I will deploy and carry out the “Special Enforcement Action of the Securities Regulatory Law Network” to concentrate on investigating and punishing violations of laws and regulations that are strongly reflected in the market and seriously endangered. Since the beginning of this work, it has concentrated on the deployment of six batches of cases, a total of 76 cases. 71 administrative penalty decisions have been issued, 7 market bans have been imposed, and 200 million yuan has been fined. 44 administrative notices have been served, and 1.18 billion yuan has been punishable. The case deployment, verification and handling of the case have been publicly released to the public 15 times.

Since June this year, I will mobilize the system supervision and law enforcement resources in a timely manner, carry out comprehensive verification of all kinds of abnormal trading behaviors, find that the clues are immediately transferred to the case investigation, and coordinate the public security organs to intervene in time according to the needs. Concentrated 22 cases were transferred to the public security organs. Seriously investigate and deal with cases of violations of laws and regulations and "stock market rumors" in off-exchange funds. At present, the seventh batch of cases are being deployed and investigated, focusing on the investigation and handling of major cases suspected of manipulating the market.

Investigating and punishing violations of laws and regulations in accordance with the law is a necessary statutory duty of the CSRC. We will adhere to strict law enforcement, efficient law enforcement, resolutely investigate and contain all kinds of violations of laws and regulations, find together, investigate and deal with, never tolerate, focus on maintaining the principles of open, fair and just market, and effectively protect the legitimate rights and interests of investors, especially small and medium investors. .

[Extended reading: full explanation of the fuse mechanism]
The so-called fuse mechanism is a protection mechanism established by the US Securities and Exchange Commission (hereinafter referred to as the "SEC"). In the course of trading, when the price fluctuation reaches a certain target, the transaction will be suspended for a period of time, similar to a fuse. It will blow when excess current passes to protect the appliance from damage.

According to the latest regulations of the SEC, when the S&P index falls by 7% in a short period of time, all securities market transactions in the US will be suspended for 15 minutes, the so-called “fuse mechanism”, but for stock index futures outside the US stock trading hours. Trading, the standards are slightly different.

The current fuse mechanism can be traced back to the global stock market crash on October 19, 1987. It was also called "Black Monday" and the Dow Jones index fell 22.61%. Subsequent events proved that the establishment of the fuse mechanism did have an effect in avoiding the “lightning crash”. On May 6, 2010, the average price index of 30 industrial stocks of Dow Jones plunged about 1000 points in a 20-minute period, a drop of 9%, which was called "lightning crash." The culprit of this incident is “high-frequency trading”. Nowadays, large-scale investment institutions mainly use high-speed computers to make investment decisions automatically in a very short time according to the transaction model, in order to trade with other investors in the market, but high-speed orders are generated. Mistakes can bring disaster to the stock market.

In addition to the fuse mechanism for the stock market, the SEC also has a mechanism to limit the upper and lower limits of price fluctuations, that is, if the price rises and falls more than 5% within 15 seconds, the stock will be suspended for 5 minutes, but The price fluctuations of individual stocks with opening and closing prices and prices not exceeding US$3 can be relaxed to 10%.

In addition to the United States, France, Japan, South Korea and other countries have also adopted a fuse mechanism. In foreign exchanges, the “fuse” system has two manifestations, namely “melting and breaking” and “melting and continuing”. The former means that when the price hits the melting point, the transaction is stopped for a subsequent period of time; the latter means that when the price touches the melting point, the transaction can continue in the subsequent period of time, but the price is limited to the melting point.

According to the regulations, when the potential transaction price of the above securities is 10% different from the reference price (referring to the last transaction price at least five minutes ago), the fuse mechanism will be triggered, and then a five-minute "cooling-off period" will be implemented. Stocks can continue to trade during the “cooling-off period”, but the range of price fluctuations is limited to the 10% fluctuation range. When the “cooling-off period” expires, the transaction returns to normal, and the new reference price will also be based on the “cooling-off period” trading situation.

According to industry insiders, the main purpose of the fuse mechanism is to give the market a cooling-off period, allowing investors to fully digest market information and prevent irrational fluctuations in the market or a certain product, especially to prevent the market from falling sharply and even causing stock market crashes to maintain market stability. .

Jiang Xingchun, director of the Soochow Futures Research Institute, said that once the market touches the fuse mechanism, it means that there are relatively large fluctuations and risks. Through the fusing mechanism, market participants pay attention to risks and rationally treat the current market, and suspend trading for a short time to keep the market long and short. Rationality and a correct assessment of the future direction of the market to make risk management decisions, while also slightly intervening in programmatic trading.

The fuse mechanism was originally derived from a new initiative after the US stock market crash. Cheng Xiaoyong, assistant director of Baocheng Futures Finance Research Institute, said that the fuse mechanism is equivalent to “shock absorber”, and its benefits are in the following aspects: First, it provides an early warning effect on the trading risk of the market, effectively preventing the suddenness of risks. And the severity of the risk; the second is to win the thinking time and operation time to control the trading risk; the third is to help eliminate the old price and lead to the decline of liquidity in the futures market; the fourth is to provide an institutional guarantee for the gradual resolution of trading risks.

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