"Dual Tranche, Dual Counter" Model

Transferability between the HKD-traded and RMB-traded securities (from one counter to another counter without change in legal ownership) will help to ensure the efficiency of arbitrage and thereby maintain the prices of the two counters in the secondary market within a reasonable gap. Therefore, we favour allowing transferability between the two counters.

No. Under the dual-counter model with transferability, where an investor bought HKD-traded securities and subsequently converted them into RMB-traded securities and sold them on the RMB counter, the transactions do not actually involve a net increase of RMB funds in the offshore market. It only entails the transfer of RMB funds in the offshore market from one investor to another. Furthermore, the daily conversion limit only applies to banks' RMB currency exchange business with personal customers.

Where the securities of the two counters are of the same class of shares/units, holders of securities shall be entitled to identical rights.

Yes, given transferability, the public float will be determined on a combined basis.

At the initial launch of the Dual Tranche, Dual Counter model or Dual Counter (“DC”) model, HKEx will calculate the market capitalization of a listed company or ETF which has both RMB-traded securities and HKD-traded securities by multiplying the total number of issued shares/units (including both counters) with the price of the HKD counter. HKEx will continuously review this calculation method, taking into account the development of market practice for the DTDC/ DC model, relative liquidity of the dual counters and market feedback.

Any dividend policy (and for that matter other corporate actions) will have to be consistent with the fact that the securities of the two counters are the same class of securities. Subject to the above and insofar as dividend payment is concerned, the issuer may offer an option to all the holders of the securities to elect to take a dividend in the currency in which the dividend is declared or in an alternative currency or currencies, and set a different default currency for the respective counters in the absence of an election by the holders of the securities. In the cases in which the issuer offers to pay a dividend in RMB (as an option), it will have to consider its access to RMB for dividend payment and its obligation in that respect in relation to the availability of RMB. There should be adequate disclosure in relation to dividend payment and currency options (if any) in the prospectus.

It will be the issuer's option to decide. We may introduce criteria for the de-counter option.

Given transferability, the ownership continuity and control requirement will be based on the combined tranches. We will review the requirement based on the circumstances and merits of individual cases.

The Listing Rules allow an issuer to seek a general mandate of 20 per cent of its total issued share capital. Where there is transferability, the limit would be calculated on a combined basis. It would be the issuer's option to decide the currency for the new issue.

It will be the issuer's option to decide. Similar to dividend payment, the issuer may offer an option to all shareholders to elect to receive RMB-traded shares or HKD-traded shares, and set a different default currency for the respective tranches in the absence of an election by the shareholders.

Where there is transferability, the size limits will be determined on a combined basis.

It will be the issuer's option to decide.

It will be the issuer's option to decide. Where there is transferability, the 10 per cent limit on the repurchase mandate will be determined on a combined basis.

Exchange trades executed under the respective counters will be cleared and settled in CCASS as two individual stocks. There is no inter-counter netting for dual-counter trading. After netting under the CNS System, one CNS stock position will be netted for each DTDC counter, i.e. RMB-counter and/or HKD-counter.

CPs should settle their CNS stock position on the basis of T+2 per stock, i.e. per counter basis, which is in line with the existing settlement mechanism.

As always, Participants should ensure they have sufficient securities available to fulfill their CNS short positions on T+2. For "inter-counter" day trades, if a Participant relies on securities received from a long position in one counter to settle its short position in another counter, CCASS Participants should submit a "Multi-counter Transfer Instruction" to HKSCC through CCASS Terminals before 3:45 p.m. In case the securities received from the long position are subject to the on-hold mechanism, Participants should effect cash prepayment to release the CNS allocated securities before effecting the inter-counter transfer. All activities related to "Multi-counter Transfer Instructions" are recorded in a CCASS report which is available to Participants for reconciliation purpose.

Buy-in exemption will be considered for applications that satisfied the defined conditions. Where the Participant has an unsettled short position in one counter and has sufficient shares/units and/or long position in the other counter, following transfer of which are sufficient to settle the relevant short position on T+2, Participant can submit an “Application Form for Exemption of Buy-in” to HKSCC not later than 8:00 p.m. on T+2. Participant is required to provide HKSCC a copy of the relevant CCASS report evidencing the shares/units and/or long position are available to cover the relevant short position on T+2; evidence that the Participant has submitted a Multi-counter Transfer Instruction which is either cancelled by the system after the batch transfer run and/or a system message is returned as there are insufficient stock balance upon input of Multi-counter Transfer Instruction after the batch transfer run; and effected cash prepayment, if applicable.

Marks calculation for dual-counter securities will be on a per counter basis. Marks will be collected in HKD, which is in line with the current arrangements.

CPs should submit their Multi-counter Transfer Instruction electronically via CCASS on-line.

No, inter-counter transfers are not subject to any on-hold / earmark mechanism. Securities are freely transferable after they are "transferred" from one counter into its opposite counter.

The investor should take the physical certificates (registered in investor's name) to the relevant share registrar to request shares be transferred from the original counter to the other counter. The whole transfer process may take place overnight or up to 2 weeks depending on the required service level of the investor.

No, CPs can only deposit physical certificates of one counter into CCASS as holdings of the same counter. In case CPs wish to utilise such shareholdings under the opposite counter, after depositing the share certificates into CCASS, CPs should effect a Multi-counter Transfer Instruction to transfer the shareholdings from one counter into the opposite counter.

Creation and redemption of new units in the primary market for HKD-denominated ETFs adopting the Dual Counter model are in HKD only. As such, an ETF only adopts the Dual Counter model for secondary trading purposes.

Subject to the agreed operation arrangement between the ETF manager and its Participating Dealer, newly issued units from creation in the primary market can be designated in the RMB counter and/or HKD counter immediately upon issuance. Investors should consult the Participating Dealers for more details including any fees and other conditions involved.

Dividends of a Dual Counter HKD-denominated ETF are declared in HKD and may be paid in HKD only or, where so offered by the ETF manager, in RMB as well as HKD depending on an investor’s election. Where an investor does not have an RMB account, the investor may have to bear the fees and charges associated with the conversion of any dividend in RMB into HKD or any other currency.

Any dividend policy (and for that matter other corporate actions) will have to be consistent with the fact that units traded on the two counters are of the same class and unitholders of both counters must be treated equally.

If an ETF manager chooses to set a different default currency for dividend payment (i.e. pay dividend in RMB for RMB counter and HKD for HKD counter in the absence of an election by the unitholders), the ETF manager must offer an election to investors in both counters to choose the currency in which they would like to receive the dividend. This means that both investors in RMB counter and HKD counter can elect to receive dividend in RMB or HKD. There should be adequate disclosure in relation to dividend payment and currency options (if any) in the prospectus. Investors should refer to the prospectus in relation to details of dividend payment and if in doubt, consult the ETF manager or your brokers.

The official NAV per unit of a HKD-denominated ETF will be calculated and published in HKD. The NAV per unit and iNAV per unit for a HKD-denominated ETF with a RMB counter will also be available in RMB on the website of the relevant ETF for reference purpose. The NAV per unit and iNAV per unit in RMB are calculated by converting the NAV per unit and iNAV per unit in HKD into RMB using the foreign exchange rate as specified by the ETF manager or its agent and disclosed on the ETF’s website.

Same for all ETFs, each ETF counter must have at least one SMM.

Yes, the TSF will support the trading of the RMB counter if the particular ETF is eligible for the TSF. A list of securities to be supported by the TSF is published on the HKEx website. Non-equity related ETFs will not be supported at this stage however. For details about the TSF, please refer to the RMB Equity Trading Support Facility page on the HKEx website.

Apart from the above, please also refer to the relevant information set out in Part 4 of this FAQ relating to “Dual Counter Model for RQFII A-share ETFs”, which would apply similarly to a Dual Counter HKD-denominated ETF.

HKSCC will charge HKD5 for each effected Multi-counter Transfer Instruction.

It will depend on the service level required. It may cost up to HKD$100 (subject to the pricing scheme of share registrars) per certificate for 2-day express service.

*Applicable to units of an ETF issued in physical form only.

CCASS fees for nominee services of multi-counter stocks are the same as that for other CCASS stocks, including the maximum cash dividend collection fee of HKD10,000 per stock.

The ISO 6166 standard - ISIN (International Securities Identification Number) -uniquely identifies a security. It is a 12-character alpha-numerical code that does not contain information characterizing financial instruments but serves for uniform identification of a security at trading and settlement. 

ISINs are issued by the identified, responsible National Numbering Agency based upon a set of guidelines that have been established amongst all National Numbering Agencies. The Association of National Numbering Agencies (ANNA) has updated its ISIN Guidelines document to reflect this principle.

According to the assessment and agreement made with ANNA and similar to the local code arrangement, two separate and unique ISINs shall be assigned to the RMB counter and HKD counter respectively, to allow for clear identification between the two counters in the post-trade settlement and position management.

OTP-C will apply checking at the order level, irrespective of the stock counter.

As the securities in the two counters are of the same class and transferable, the sale would normally be regarded as a long sale.

Yes, this would be permissible under the existing rules. However, in order to meet the settlement obligation, brokers should alert their clients the time and fees required to transfer securities from one counter to the other. EPs should also require and facilitate their clients to do the transfer for timely settlement of transactions on T+2 day.

As the securities in the two counters are of the same class and transferable, the sale would normally be regarded as a covered short sale and thus subject to the relevant short selling regulations as stipulated in the Eleventh Schedule of the Rules of the Exchange and the Securities and Futures Ordinance.

Single-counter trading

There are no additional requirements to brokers for trading within the HKD counter. For trading within the RMB counter, brokers must ensure their own readiness for trading and settlement of RMB securities.

Inter-counter trading

Brokers should review and ensure that their front and back office systems as well as operations are ready to support such client trading activities.

Broker may consider if there is a need to automate their systems such that inter-counter selling as well as transfer of securities between the two counters can be done automatically.

In any case, if brokers' systems cannot handle automatic inter-counter trading and transfer, brokers should have a set of guidelines advising their clients how inter-counter trading could be processed manually and clearly communicate to their clients how these trading activities could be supported and if any additional charges are imposed.

While from a regulatory standpoint, an investor may buy from one counter and sell the same on the other counter in the same day, he/she should bear in mind that:

o Such inter-counter day trades might lead to settlement failure of the sale trades at the CCASS on T+2 if the stocks of the buy trades are only delivered by CCASS at the last settlement run on T+2, leaving not enough time to transfer the stocks to the other counter to settle the sales trades on the same day. Although under the circumstances and provided that the concernedCCASS Participants ("CP") could provide necessary documentary evidence to HKSCC, HKSCC may grant T+3 buy-in exemption, the investors may still be subject to other handling fees imposed by his/her brokers, and the consideration of the sale trades may not be available to the investor from his/her broker until T+3 or even later;

o Some EPs and CPs may not provide inter-counter day trade services initially due to various reasons including operation, system limitations, associated settlement risks (as noted above) and other business consideration.

Therefore, an investor who wishes to conduct inter-counter day trades should consult his/her broker and fully understand the services that his/her broker may provide in this regard and the associated risks and fees.

For RMB IPOs, investors and brokers will be able to pay the levies and other costs (such as commission) in RMB or HKD. For secondary market trading in RMB-traded securities, brokers will have to pay the SFC levy as well as other exchange and clearing fees in HKD. For stamp duty, HKEx's understanding is that the current legislation requires the stamp duty for securities transactions, including transactions in RMB-traded securities, to be paid in HKD.