Regulators say that companies can apply for Chinese Depository Receipts beginning in June. That comes now that the China Securities Regulatory Commission has considered public opinions on draft rules involving the issuance and trading of CDRs. So, what are the highlights of the new rules?

CDRs are certificates issued by Chinese banks that represent a pool of foreign equity traded on Chinese exchanges. The CDR rules have established a framework for the selection of pilot companies, issuance terms, approval systems and information disclosure. The CDRs widen financing channels for innovative firms are already listed overseas.

ZHAO XIJUN, DIRECTOR INST. OF FINANCE & SECURITIES, RENMIN UNIV. OF CHINA "The core of the CDR is how innovative companies do financing in the mainland through CDRs and trade in the exchanges. I view CDRs as a new derivative from stocks and a new financing tool."

The new rules stipulate that companies will have re-financing rights in the A-shares market after issuing CDRs and enjoying treatment as listed companies. The rules also set CDR holders' voting terms and protection measures for investors when CDRs are delisted or bought back. More rules on information disclosure and pricing will be rolled out soon.

ZHAO XIJUN, DIRECTOR INST. OF FINANCE & SECURITIES, RENMIN UNIV. OF CHINA "Information disclosure may have different terms from the basic securities such as stocks and bonds. Pricing and price inquiries may also differ from current stocks."

The rules are explicit concerning the supervision of the issuance and trading of CDRs and the rights and duties of the participants. The new rules will help innovative companies return to the domestic capital market through the issuance of CDRs and the preparation for Shanghai-London stock connect. Regulators said companies can apply to issue CDRs after the formal rules are released in June.