The Shenzhen Stock Exchange has been approved by the China Securities Regulatory Commission to launch Listed Open-ended Funds (LOFs), the exchange announced yesterday.

A LOF is an open-ended fund that is listed and transacted on a stock exchange. According to the LOF business regulation of the Shenzhen exchange, which was also approved yesterday, the initiator of a LOF, or the fund manager, must obtain a listing approval from the stock exchange, China Daily reported Wednesday.

Then the fund can be issued through the trading system of the bourse and become listed. During the issue period, investors can subscribe to a LOF through a valid brokerage account in the same way as buying a closed-end fund. And they can trade the fund after it is listed.

A spokesman of Shenzhen Stock Exchange said yesterday that LOF is a major innovation for the fund industry and the exchange as well. It can apply the trading and clearing systems of the exchange to provide investors a new investing tool, with convenient subscription and trading access.

Meanwhile, LOF also offers fund management companies a new and economical platform to develop new fund products and gives brokerages fresh income resources.

It will also enhance information disclosure of open-ended funds.

Several fund management companies have already applied for licences to launch LOFs on the Shenzhen Stock Exchange.

Shenzhen-based Southern Fund Management is a pioneer in the sector. It has been working with the exchange to develop relevant rules and product designs and is a most promising candidate to bring in the first LOF for the Shenzhen Stock Exchange.

China Daily