Multiple Chinese private funds have received notices to suspend new cross-border TRS transactions.

Multiple private equity industry insiders in mainland China disclosed that they received notices from their partner securities brokers overnight, as regulators have ordered a halt to new additions to cross-border Total Return Swap (TRS) positions managed by private equity firms. TRS, or Total Return Swap, is a financial derivative that allows private equity firms to enter into return swap agreements with counterparty brokers to gain exposure to the returns (or losses) of overseas assets without directly holding those assets—meaning principal does not cross borders. Driven by the strong performance of the global tech sector this year, many private equity firms have been allocating overseas assets via cross-border TRS. Since May, eight Chinese government departments including the China Securities Regulatory Commission (CSRC) have jointly issued the "Implementation Plan for the Comprehensive Rectification of Illegal Cross-Border Securities, Futures and Fund Business Activities", cracking down hard on leading cross-border internet brokers such as Tiger Brokers, Futu Holdings and Longbridge. As space for mainland Chinese residents to conduct illegal cross-border stock trading has shrunk, private equity products using cross-border TRS to allocate overseas tech assets have attracted growing capital interest. Multiple private equity insiders noted: "The notice came rather abruptly, and some product strategies may see certain adjustments in the short term. We are currently awaiting further refined regulations on cross-border TRS quotas."