The securities regulators of Hong Kong and mainland China today announced the eagerly anticipated Stock Connect programme to facilitate direct trading between the two markets.
The Securities and Futures Commission (SFC) and the China Securities Regulatory Commission (CSRC) released a joint statement revealing that the Shanghai-Hong Kong Stock Connect scheme would start on November 17.
In doing so, they emphasised that all the necessary trading and clearing rules and principles for cross-border cooperation had been agreed upon and put in place.
At the same time they urged market participants to familiarise themselves with regulatory requirements and operational rules and be aware of the differences between the laws and market practices of the two markets.
Effectively the regulators have given the market a week’s notice to prepare for launch. That is considerably less time than was asked for late last month by the Asia Securities Industry and Financial Markets Association (Asifma), as reported.
The industry trade body had sent a letter to the SFC requesting two weeks to a month’s notice for the market to prepare before the scheme’s official launch.
Originally the Stock Connect scheme had been expected to launch last month, with Chinese premier Li Keqiang having first revealed plans for the scheme at the Boao Forum on April 10, as reported.
However, the Hong Kong stock exchange confirmed late last month that the programme had been delayed amid speculation that the city’s pro-democracy Occupy Central protests had been an influencing factor (which government officials denied), as reported.
But in their joint statement today, CSRC and SFC noted they had worked together closely since their initial joint announcement of the scheme on April 10.
They pointed out that the necessary trading, clearing and other relevant rules had been finalised, as had daily and aggregate quota mechanisms and other regulatory and operational arrangements.
“The stock exchanges and the clearing houses have completed a series of market rehearsals with market participants in both markets and reported that the systems are ready and contingency plans are in place,” the statement read.
They pointed out that numerous market training and investor education programmes had been conducted, while the two sides had agreed on the principles for cross-boundary regulatory and enforcement cooperation.
Fear over market front-running, or so-called rat-trading, had been voiced by various market participants during the course of the build-up, as reported.
Further, industry professionals have also spoken of their uncertainty over mainland China’s policy on state secrecy and quite how forthcoming the CSRC would be on sharing sensitive information, as reported.
But in today’s statement the two sides noted that they had signed a memorandum of understanding (MoU) on strengthening regulatory and enforcement cooperation under the direct trading scheme.
“The enforcement MoU strengthens the enforcement cooperation between the CSRC and the SFC and signifies their joint commitment to take effective action against cross-boundary illegal activities and market misconduct to maintain an orderly market and protect investors under the Shanghai-Hong Kong Stock Connect,” the regulators stated.
The CSRC and SFC stressed they had established arrangements and procedures for cross-boundary liaison and cooperation on any contingency or major event that affected the pilot scheme and for referring and handling related investor complaints.
Their statement also pointed out that the mainland’s investor protection bureau and Hong Kong’s investor education centre had established an arrangement to cooperate on investor education related to the Stock Connect scheme and would continue their efforts after launch.
“It is essential that all parties who intend to participate under the Stock Connect familiarise themselves with applicable regulatory requirements and operational rules and ensure that proper internal controls and risk management are in place,” the statement concluded.
“Investors should be aware of the differences between the laws, regulations and rules of, and market practices in, mainland China and Hong Kong and should take appropriate action to ensure compliance and manage their risks when investing through the Shanghai-Hong Kong Stock Connect.”