Hong Kong Exchanges and Clearing Limited (HKEx) is rolling out a significant enhancement to its Central Clearing and Settlement System (CCASS) on 30 March 2015 (Monday) to enable investors* to settle their trades of A shares (Northbound trades) through Shanghai-Hong Kong Stock Connect (Stock Connect) similarly to the way they settle their trades of Hong Kong stocks.

The new service will allow investors to open Special Segregated Accounts (SPSAs) in CCASS via its Custodian Participants or its General Clearing Participants (GCPs) which are not Exchange Participants (EPs).  This new feature will address investors’ biggest concern by enabling them to meet Stock Connect’s pre-trade checking requirement for A shares without transferring their shares before they sell them.  Investors will only be required to transfer shares they are selling to their broker for settlement after their sell orders are executed.  Under the current arrangements, A shares must be transferred for pre-trade checking before they can be sold.

“This new service is part of HKEx’s ongoing effort to refine the Stock Connect programme,” said Calvin Tai, HKEx’s Head of Global Clearing (Asia).  “SPSAs will make it easier for investors to minimise counterparty risk in A-share settlement and to maintain compliance with asset segregation and safe keeping requirements for institutional funds.  They are expected to benefit our Exchange Participants by giving them additional business opportunities.

In order to allow time for Custodian Participants, non-EP GCPs and executing brokers to set up SPSAs for their clients, the pre-trade tracking mechanism based on the SPSA model will be launched on 20 April 2015.

“After rollout, we understand it will take some time for Clearing Participants to set up SPSAs for their clients,” Mr Tai added. “We will continue to strengthen the Stock Connect programme to benefit the market and investors.”

Additional SPSA information as well as Frequently Asked Questions will be posted on HKEx website later.

There are also new Rule amendments, which will become effective on 30 March 2015, to clarify the role of Hong Kong Securities Clearing Company Limited, a wholly owned subsidiary of HKEx, as the nominee holder of A shares under Stock Connect.

* Investors that use Custodians for safekeeping of A shares.

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