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CSRC Announces Guidelines on Participation in Mainland-Hong Kong Stock Connect

The China Securities Regulatory Commission (CSRC) recently issued the Guidelines on Participation of Securities Institutions in Mainland-Hong Kong Stock Market Trading Links, (CSRC Announcement No.24 [2016]) which took effect on the day of its promulgation. These Guidelines clearly set out the specific requirements for securities companies and public funds managers to conduct “Southbound Hong Kong Trading Link” business in the Mainland-Hong Kong stock connect programme.

The CSRC announced the Guidelines on Participation of Publicly Offered Securities Investment Funds in Shanghai-Hong Kong Stock Connect (CSRC Announcement No.5 [2015]) in March last year, stating that funds managers may raise new funds and invest in Hong Kong stock market shares under the Shanghai-Hong Kong Connect without having QDII (qualified domestic institutional investor) qualifications. Funds that have been approved or registered before the promulgation of these guidelines should participate in the programme through different procedures as specified in their contracts.

The present Guidelines combined the existing regulatory documents for “Southbound Hong Kong Trading Link” by securities companies and public funds managers. On the whole, the requirements are the same as those for securities institutions participating in the Shanghai-Hong Kong Connect although the scope of eligibility is extended to cover all Mainland-Hong Kong stock market trading links, including the Shenzhen-Hong Kong Stock Connect.

In view of the new situations and new problems investors may face in “Southbound Hong Kong Trading Link” due to mutual order-routing after the launch of the Shenzhen-Hong Kong Stock Connect, the Guidelines specially urge securities companies to earnestly conduct investor education and risk disclosure so as to better protect the legitimate rights and interests of investors.

The Guidelines made it clear that when being entrusted to provide “Southbound Hong Kong Trading Link” services, a securities company should disclose to its clients the risks associated specifically with mainland-Hong Kong stock market trading links, including quota control, differences in trading days, absence of price fluctuation limits, long-term suspension and resumption of trading, frequent rights issues and consolidations, and direct exit, as well as differences in trading, settlement, exchange rates and other areas under different order-routing arrangements in “Southbound  Hong Kong Trading Link”. It is important to make sure that the language is easy to read and understand, the format is eye-catching, and the content is clear and accurate.

The securities company must also remind its investors about the presence of mutual order-routing connectivity and let them know that they must clearly select their preferred order-routing arrangement when placing orders. It is forbidden to make the selection for investors without their explicit consent.

The Guidelines also called for steps to stipulate the trading limits of investors in a prudent and orderly manner, devise reasonable internal assessment criteria, and ensure that all “Southbound Hong Kong Trading Link” investors have clear intentions, the required assets and rich investment experience besides having a full understanding of the securities market in Hong Kong. Securities companies must not indiscriminately go after the numbers of clients and new accounts.

The release of the Guidelines as a supporting document for the stock connect programme is seen as a further step towards the launch of the Shenzhen-Hong Kong Stock Connect.

For details of the Guidelines (CSRC Announcement No. 24 [2016]) in Chinese, please see:


Content provided by Picture: HKTDC Research
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