HKEx implements Stock Connect solutions
08 January 2015 Hong Kong
Image: Shutterstock
Hong Kong Stock Exchange (HKEx) is working on solutions to help investors to use the Shanghai-Hong Kong Stock Connect programme, with the aim of implementing new services early this year.
Since the launch of the Stock Connect programme, HKEx has been assessing the understanding its functionality through the briefing overseas regulators and associations, answering questions from various industry players, and published frequently asked questions online, with conclusive answers.
In December, the first UCITS fund was approved to join the scheme by the Luxembourg regulator, and the exchange is working on a new, fast-tracked system for updating prospectuses for A-share investment.
The exchange found that some investors were concerned about their proprietary right in the A shares held through the Hong Kong Securities Clearing Company Limited (HKSCC), as a wholly owned subsidiary of HKEx as a nominee.
It has now stated that investors will not need to have beneficial ownership under both Hong Kong and mainland China law, meaning that proprietary rights are protected, even if HKSCC fell in to insolvency.
The new rules will also allow investors to vote and receive dividends through HKSCC as nominee holders. It also intends to reduce the compliance burden on fund managers, who will not be required to obtain licences in mainland China.
The exchange is also rolling out a short-selling service through Northbound Trading, which will be available to Hong Kong and overseas investors. This aims to give investors greater flexibility in trading strategies and risk management.
An additional system function, scheduled for testing in March, will enable tracking of stock holdings in custody. If tests are successful, systems will be upgraded throughout the Stock Connect programme. The change is intended to allow investors who hold A shares through custodians to comply with ore-trading checking requirements without transferring their shares to brokers before the execution of a sell transaction.
Christine Wong, HKEx chief counsel and head of legal services, said: “We understand that the market needs time to get used to the idea of beneficial ownership in shares held through a nominee in the context of Mainland law even though it is not a new concept under both Mainland and Hong Kong law. We are committed to making this and other concepts adopted in Stock Connect properly understood by investors and other stakeholders.”
“We have had some very good discussions with market participants, regulators and our Mainland counterparts so far and will continue to work with them to develop Stock Connect further.”
Since the launch of the Stock Connect programme, HKEx has been assessing the understanding its functionality through the briefing overseas regulators and associations, answering questions from various industry players, and published frequently asked questions online, with conclusive answers.
In December, the first UCITS fund was approved to join the scheme by the Luxembourg regulator, and the exchange is working on a new, fast-tracked system for updating prospectuses for A-share investment.
The exchange found that some investors were concerned about their proprietary right in the A shares held through the Hong Kong Securities Clearing Company Limited (HKSCC), as a wholly owned subsidiary of HKEx as a nominee.
It has now stated that investors will not need to have beneficial ownership under both Hong Kong and mainland China law, meaning that proprietary rights are protected, even if HKSCC fell in to insolvency.
The new rules will also allow investors to vote and receive dividends through HKSCC as nominee holders. It also intends to reduce the compliance burden on fund managers, who will not be required to obtain licences in mainland China.
The exchange is also rolling out a short-selling service through Northbound Trading, which will be available to Hong Kong and overseas investors. This aims to give investors greater flexibility in trading strategies and risk management.
An additional system function, scheduled for testing in March, will enable tracking of stock holdings in custody. If tests are successful, systems will be upgraded throughout the Stock Connect programme. The change is intended to allow investors who hold A shares through custodians to comply with ore-trading checking requirements without transferring their shares to brokers before the execution of a sell transaction.
Christine Wong, HKEx chief counsel and head of legal services, said: “We understand that the market needs time to get used to the idea of beneficial ownership in shares held through a nominee in the context of Mainland law even though it is not a new concept under both Mainland and Hong Kong law. We are committed to making this and other concepts adopted in Stock Connect properly understood by investors and other stakeholders.”
“We have had some very good discussions with market participants, regulators and our Mainland counterparts so far and will continue to work with them to develop Stock Connect further.”
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