Multiple private equity firms on the Chinese mainland have received notices to suspend new cross-border TRS transactions.

Multiple private equity professionals in mainland China revealed that they received notices from their partner securities firms last night, with regulators requiring a halt to new additions to cross-border TRS (Total Return Swap) positions by fund managers. According to public information, TRS is a financial derivative that allows private equity firms to enter into return swap agreements with counterparty securities firms to gain exposure to the returns (or losses) of overseas assets without directly holding those assets (i.e., principal remains onshore). Since the start of this year, driven by strong performance in the global tech sector, many private equity firms have allocated overseas assets via cross-border TRS. Since May, the China Securities Regulatory Commission (CSRC) and seven other government departments jointly issued the "Implementation Plan for the Comprehensive Rectification of Illegal Cross-Border Securities, Futures and Fund Operations", taking tough measures against leading cross-border internet brokerages including Tiger Brokers, Futu Holdings and Longbridge. As the space for mainland Chinese residents to trade stocks cross-border illegally has shrunk, private equity products using cross-border TRS to allocate overseas tech assets have drawn increasing capital attention. Multiple private equity professionals said: "The relevant notice came quite suddenly, and some product strategies may see certain adjustments in the short term. We are currently waiting for further detailed regulations on cross-border TRS quotas."