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Shanghai, Hong Kong Sign Stock Connect Agreement

by Mary Swire, Lowtax.net, Hong Kong
09 September, 2014

An agreement towards establishing Shanghai-Hong Kong Stock Connect (SHKSC), a ground-breaking securities trading and clearing links program, was signed on September 4, 2014.

The agreement was signed by The Stock Exchange of Hong Kong Limited (SEHK) and Hong Kong Securities Clearing Company Limited (HKEx), wholly-owned subsidiaries of Hong Kong Exchanges and Clearing Limited, the Shanghai Stock Exchange (SSE), and China Securities Depository and Clearing Corporation Limited (ChinaClear), which are jointly developing the program.

Announced on April 10 this year, SHKSC will for the first time allow eligible Mainland Chinese investors to trade stocks listed on the SEHK directly through SSE. It will also newly enable Hong Kong and overseas investors to trade stocks listed on the SSE directly through the SEHK.

HKEx Chief Executive Charles Li said that the signing of the four-party agreement "indicates that we are getting closer to our goal. The agreement is the master document for the cooperation of the four parties, clearly spelling out the obligations and responsibilities of each party based on the principles set out in the joint announcement by the regulators. It's a guide to how the program will operate, as well as the base for the related rules governing trading and clearing under the program."

SSE Chairman Gui Minjie added: "With this agreement, we have built up a complete framework for the SHKSC business that clarifies all rights and responsibilities of the four related parties in terms of trading, clearing, custody, and market surveillance. It is a milestone marking that the two exchanges and the two clearing houses have had consensus about the market mechanism and business arrangement. Our next step is to consolidate the technical preparations, release business rules, and further conduct system testing for the launch of the program."

SHKSC's official launch is planned after the relevant trading and clearing rules have been finalized, the relevant systems have been developed, all regulatory approvals have been granted, market participants have had sufficient opportunity to configure and adapt their systems, and all necessary investor education programs are in place.

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