China halts new cross‑border Total Return Swap (TRS) transactions

Chinese regulators have ordered securities firms to stop adding new stock‑linked cross‑border Total Return Swap (TRS) contracts. Existing positions may be allowed to mature or be closed, but no fresh openings are permitted. The restriction currently applies only to equity‑based TRS; futures, municipal‑bond and other FICC‑related TRS products remain unaffected.

Private‑equity funds have also received notices to cease expanding their TRS exposure. One fund manager said the notice was “rather sudden” and could cause short‑term adjustments to product strategies while awaiting detailed implementation guidelines. TRS has been a lucrative channel for offshore investment, enabling Chinese investors to capture overseas market returns without moving capital abroad, with typical channel fees of 1‑2%.

The move follows a series of actions by Beijing since May to tighten controls on overseas investment routes and curb capital outflows, after earlier crackdowns on internet brokerage firms. Regulators are still finalising the exact limits for new TRS allocations.