Frequently Asked Questions 
31/08/2009 
 

Chapter 5

Market Operations and Trading


5.3

Post-trading Arrangements: Securities Settlement and Deposit  

 

5.3.1

Will HKSCC, the securities clearing company, process settlements between investors and Clearing Participants in CCASS (ie brokers)?  

Hong Kong Securities Clearing Company Limited (HKSCC), a wholly owned subsidiary of HKEx, only provides settlement services for its Clearing Participants (ie brokers).  Investors have to settle their trades through their securities brokers.

Investors can open Investor Accounts in CCASS and become Investor Participants. Purchases and sales of stocks and the resulting settlements continue to be handled by CCASS Clearing Participants. However, Investor Participants can transfer shares with Clearing Participants or Custodian Participants by electronic book-entry and enjoy the benefits of a computerised book-entry settlement system. Stock transfers initiated by CCASS Clearing Participants or Custodian Participants as Investor Settlement Instructions (ISI) must be affirmed by Investor Participants. If money settlement is involved, HKSCC will deliver electronic payment instructions to the Hong Kong Interbank Clearing Limited (HKICL) after completing a stock transfer.  HKICL will then debit or credit the designated bank accounts of both Participants. HKSCC acts only as a facilitator of share transfers. Investors continue to manage the settlement risks involved.

 

5.3.2

How can investors keep track of their securities transactions and accounts?

In Hong Kong, brokers issue a contract note to their clients upon the closing of a transaction or their clients will receive a daily activity statement after the market closes on the day the transaction is completed. When investors use an online trading service, acknowledgement will be issued electronically by their brokers to confirm their trades.  A statement of account will also be issued on a monthly basis.  Investors should check carefully the information on these statements.

Investors can open an Investor Account in the Central Clearing and Settlement System (CCASS) of HKSCC.  Investor Accounts enable investors to deposit their beneficially owned shares in CCASS for share custody purposes. Investors should note that this is a depository account for share custody, and purchases and sales of shares made by the account holders and their settlement will continue to be handled by the account holder’s broker or custodian. However, only the Investor Account holders can authorise the transfer of shares out of their accounts. 

Investors who choose to entrust their shares to their brokers or custodians may ask their brokers or custodians to open a Stock Segregated Account with Statement Service (SSA) in CCASS for them. An SSA is a sub-account opened by a broker or custodian under its name in CCASS for its one of clients.  HKSCC is authorised to furnish activity and/or monthly statement to these sub-accounts and to allow the investors for whom brokers or custodians open sub-accounts to use certain services. The Activity Statement will show any stock movement in the SSA during the day of the statement and the Monthly Balance Statement will show the statement date balances of all stocks in the SSA, including any zero balances.  SSAs provide an additional and convenient way for investors to track their shareholdings.

For further information on Investor Accounts and SSAs, please refer to “Securities Clearing & Settlement Services” of “Clearing Services” under the “Products & Services” section of the HKEx website or contact the HKSCC Customer Service Centre at 2979 7000.  Both individual and corporate investors may open an Investor Account.  Investors who are interested in an Investor Account may contact HKSCC.  Investors who are interested in an SSA may contact their brokers or custodians about the terms and conditions.

 

5.3.3

What is an Investor Account?  

An Investor Account, provided by HKSCC, is a depository account for share custody.  Investor Accounts enable investors to deposit their beneficially owned shares in CCASS for share custody purposes.  Investors should note that purchases and sales of shares made by the account holders and their settlement will continue to be handled by the account holder’s broker or custodian.  However, only the Investor Account holders can authorise the transfer of shares out of their accounts.  Further, HKSCC provides comprehensive nominee services (including voting, distribution of dividends and entitlements, notices related to corporate actions or activities, such as rights issue and acquisition proposals, etc) and statement services to Investor Account holders.

Both individual and corporate investors may open an Investor Account.  For details of the Investor Account, please refer to “Securities Clearing & Settlement Servicesof “Clearing Services” under the “Products & Services” section of the HKEx website or contact the HKSCC Customer Service Centre at 2979 7000.

 

5.3.4

What is a Stock Segregated Account with Statement Service (SSA)?  

An SSA is a sub-account opened by a broker or custodian under its name in CCASS for its one of clients.  HKSCC is authorised to furnish activity and/or monthly statements to these sub-accounts and to allow the investors for whom brokers or custodians open sub-accounts to use certain services.  The Activity Statement will show any stock movement in the SSA during the day of the statement and the Monthly Balance Statement will show the statement date balances of all stocks in the SSA, including any zero balances.  SSAs provide an additional and convenient way for investors to track their shareholdings.

Further, an investor with an SSA can use various services.  The investor can check movements and balances of stocks in the SSA, affirm stock transfers and give voting instructions through the CCASS Phone System and the CCASS Internet System.  The investor can select to receive email or SMS alerts on stock movement activities in his or her SSA.  In addition, the investor can choose to require affirmation of instructions either on a 'Free of Payment' or 'Delivery Against Payment' basis before any movements of stock out of his or her SSA. Furthermore, the investor can receive corporate communications direct from share registrars. 

For further details of SSA, please refer to “Securities Clearing & Settlement Services” of “Clearing Services” under the “Products & Services” section of the HKEx website or contact the HKSCC Customer Service Centre at 2979 7000.  Investors who are interested in opening an SSA may contact their brokers or custodians about the terms and conditions of SSAs.

 

5.3.5

What is the main difference between an Investor Account and a Stock Segregated Account with Statement Service (SSA)?  

Shares in an Investor Account are deposited by investors in their own name in CCASS.  Shares in an SSA are under the name of and controlled by investors’ brokers and custodians.  SSAs provide a convenient way for investors to track their shareholdings.  Investors looking for a high level of control and security should consider opening an Investor Account.

For further information on Investor Accounts and SSAs, please refer to “Securities Clearing & Settlement Services” of “Clearing Services” under the “Products & Services” section of the HKEx website or contact the HKSCC Customer Service Centre at 2979 7000.  Both individual and corporate investors may open an Investor Account.  Investors who are interested in an Investor Account may contact HKSCC.  Investors who are interested in an SSA may contact their brokers or custodians about the terms and conditions.

 

5.3.6

If investors entrust their share certificates to brokers or custodians, how long does it take to withdraw share certificates from the CCASS depository?  

Investors who entrust their share certificates to brokers or custodians have to notify their brokers or custodians if they want to withdraw share certificates. Brokers or custodians who submit withdrawal instructions before 2 pm on a working day can usually collect the share certificates before 5 pm the same day or such time as HKSCC may prescribe. Those who do so after 2 pm can collect the share certificates the next business day or such time as HKSCC may prescribe.

Withdrawal of odd lot certificates is subject to the availability of the share certificates in the CCASS Depository. Splitting of share certificates may be necessary if the required odd lot certificates are not available. Generally, it will take 12-13 business days because HKSCC often needs to contact the share registrar to split the share certificates.

 

5.3.7

How can investors sell their shares if they choose to keep the share certificates themselves?

Investors may keep share certificates and register them in their own names. The designated share registrar will send corporate information and dividend entitlements directly to them. If they want to sell the shares, they can only do so through brokers. Investors who choose to keep share certificates themselves risk losing them, and once they are lost it is both time-consuming and costly to apply for replacements.

Investors who have opened Investor Accounts in CCASS can keep their shares in their own accounts. When they want to sell the shares, they can transfer them to their brokers by electronic book-entry for settlement purposes.

 

5.3.8

What are the procedures for changing the name of the registered person? How long does it take?

Investors should ask the share registrar of the securities about the procedures. To find out who the registrars are, please refer to the "Company/Securities Profile" under "Investment Service Centre" on the HKEx website. Investors should contact respective share registrar to check the exact days required for the services.

 

5.3.9

What if a share certificate is lost?

Investors should directly report the loss of share certificates to share registrar of the listed company for and request the issue of new share certificates.  The name and contact details of share registrars are available under "Company/Securities Profile" at the Investment Services Centre on the HKEx website.

 

5.3.10

How can investors update their shareholdings in the event of corporate actions such as stock splits, share consolidation or board lot size changes?   

Investors should note that the original share certificates are not valid for trading and settlement following corporate actions such as stock splits or share consolidation.  The share registrar is responsible for exchanging share certificates for shareholders following such corporate actions. Shareholders holding shares in physical form will not be charged if they go to the share registrars within the period specified by the listed company.  Otherwise, the shareholders may be charged a fee. Investors should refer to the company announcement on the HKExnews website or contact the share registrar for detailed arrangements for exchanging share certificates.

If investors’ shares have been already deposited in CCASS, HKEx will arrange for the exchange of share certificates and update the CCASS shareholdings of the CCASS Participants (including Investor Participants) on the effective date of the corporate action.

 

5.3.11

What should investors do with shares of companies which have changed their names?

Investors can check with the Companies Registry for the current registration record of the company in Hong Kong.  If the company has changed its name but still maintains its listing status on the Stock Exchange, investors can check with the company's share registrar for details of how to change their share certificates, as well as procedures, fees and other documentation required. The name and contact details of share registrars are available under Company/Securities Profile at the Investment Services Centre on the HKEx website.

 

5.3.12

Can an investor who holds shares in a company attend the company's annual general meeting (AGM) if he has not received a notice to do so? 

If the shares owned by an investor are registered in the name of HKSCC Nominees Limited, he may exercise his vote at the AGM by giving instructions to Hong Kong Securities and Clearing Company Limited (HKSCC) through his brokers. If an investor has opened an Investor Account in CCASS and has deposited shares into the CCASS Depository, he may vote on corporate actions and activities by giving instructions directly to HKSCC. HKSCC will then send its representatives to the AGM and vote according to the instructions received. If an investor wants to vote in person or appoint a proxy to attend the AGM and vote for him, he must make a request through his brokers to HKSCC. Investors who have opened an Investor Account in CCASS can make the request to HKSCC directly.

 

5.3.13

How do investors receive share dividends? 

Investors holding securities registered in their names (physical scrip) receive dividends directly issued from the listed issuers.

Securities deposited with CCASS Participants are held in the custody of CCASS and registered under HKSCC Nominees Limited (HKSCC Nominees). In these cases, dividends are issued to HKSCC Nominees which then allocate them to CCASS Participants quickly. CCASS Participants who have received dividends from CCASS are expected to re-allocate the dividends to their clients as soon as practicable.

However, investors should note that CCASS Participants may not necessarily deposit their securities with CCASS. In the case of securities registered in the name of a CCASS Participant's nominee, dividends are issued to the nominee who passes them to clients.

If an investor has opened an Investor Account with Hong Kong Securities Clearing Company Limited (HKSCC), HKSCC Nominees will deposit dividends received from listed issuers directly into the specified bank accounts of the investor.

 

5.3.14

What should investors do if the bonus shares distributed by a listed company are not listed in Hong Kong, or are non-eligible for CCASS?

The brokers or custodians acting on behalf of the investors (or the investors themselves if they have an Investor Account in CCASS) will be informed by HKSCC to withdraw the bonus shares from the CCASS Depository. The investors then have to re-register the shares in their own names.

 

5.3.15

Is it difficult to trade shares which are held by investors and have not been admitted to CCASS?

As of December 1994, all securities newly listed on the Stock Exchange must be admitted to CCASS on their first trading day. If investors hold Hong Kong-listed securities which have not been admitted to CCASS, they can still trade them on the securities market of HKEx though settlement will be conducted outside CCASS. If the securities are not listed on the Stock Exchange, investors are allowed to be trade the shares and settle the transactions in the over-the-counter, or OTC, market.