The Securities and Futures Commission (SFC) and the China Securities Regulatory Commission (CSRC) have approved the launch of the Shanghai-Hong Kong Stock Connect on 17 November 2014.
The Shanghai Stock Exchange, the Stock Exchange of Hong Kong (HKEx), China Securities Depository and Clearing Corporation and Hong Kong Securities Clearing Company have received approval from regulators in China and Hong Kong to provide mutual trading access between the Shanghai and Hong Kong stockmarkets, starting at the coming Monday.
As reported, the launch of Shanghai–Hong Kong Stock Connect is expected to increase cross-border access to investment and generate more opportunities for trading of derivative-linked instruments between the two markets.
William Chan, head of Asia – Pacific equity derivatives research at BAML said at a press conference last week that once the scheme is in place there will be increased demand for hedging when investors build up their A-shares portfolios via stock connect and investors are not allowed to hold short position of A-shares under the current scheme.
Carlson Tong, the SFC’s chairman welcomed the announcement and congratulated both regulators for establishing innovative and robust mechanisms in protecting the integrity of both markets; while Charles Li, chief executive at HKEx told SRP that the launch of Shanghai-Hong Kong Stock Connect will open further the Chinese market.
“The launch will be a very significant breakthrough in the opening of China’s capital markets for both domestic and international investors as well as a landmark in the internationalisation of the renminbi,” he said.
According to the announcement, all detailed requirements of the stock connect including necessary trading and clearing rules as well as the daily and aggregate quota mechanisms and other operational arrangements have now been finalised. Also both exchanges and clearing houses have completed a series of rehearsals within a soft launch environment with market participants to ensure the systems are ready and contingency plans are in place.
The different regulatory frameworks of both markets had been the main obstacle during the preparations for the hard launch of the scheme. The two regulators entered into a Memorandum of Understanding earlier in October on strengthening cross-border regulatory guidelines and set up a new benchmark including the timely provision of client and order data, as a way to facilitate real time monitoring of market activity.
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HKEx adds commodity derivatives to HK-Shanghai Mutual Access
China Merchants Bank introduces structured products linked to single A-share