Stock Connect Explained

Stock Connect includes Shanghai Connect and Shenzhen Connect. Shanghai Connect launched in November 2014 and is a securities trading and clearing links programme developed by HKEX, Shanghai Stock Exchange (SSE) and China Securities Depository and Clearing Corporation Limited (ChinaClear) that facilitates smooth trading between Shanghai and Hong Kong markets.

HKEX and SSE have established mutual order routing connectivity and related technical infrastructure to enable investors of their respective market to trade designated securities listed in the other’s market. Shenzhen Connect launched in December 2016, by and large applies similar programme principles and designs as Shanghai Connect.

Shanghai Connect and Shenzhen Connect are open to all Exchange Participants (EPs) of SEHK, but those who wish to participate must satisfy certain eligibility requirements as published on the HKEX website here https://www.hkex.com.hk/mutualmarket.

Under Shanghai Connect, Hong Kong and overseas investors are able to trade selected stocks and ETFs listed on the SSE market. (“SSE Securities”). Trading of SSE Securities (except STAR stocks) under Shanghai Connect is open to all Hong Kong and overseas investors including institutional and individual investors.

Trading of STAR stocks is limited to institutional professional investors. Under Shenzhen Connect, Hong Kong and overseas investors are able to trade selected stocks and ETFs listed on the Shenzhen Stock Exchange (SZSE) market (“SZSE Securities”).

Trading of SZSE Securities (except ChiNext stocks) under Shenzhen Connect, is open to all Hong Kong and overseas investors including institutional and individual investors. Trading of ChiNext stocks is limited to institutional professional investors.

Investors can refer to the lists at SSE website and SZSE websites below (in Chinese) for the categorization.

• SSE stocks
• SSE ETFs
• SZSE stocks
• SZSE ETFs

For China Connect Securities eligible for Northbound trading under Stock Connect, Investors can refer to the lists here .

Effective 1 Jan 2020, the Investor Compensation Fund established under the SFO has been expanded to cover Northbound trading through the China Connect Service. Moreover, investor protection measures which are required under the SFO to be observed by Exchange Participants vis-à-vis their clients, such as those relating to dealings with client securities and payment of client money into segregated accounts, are also applicable to Northbound trading activities undertaken by Exchange Participants for their clients under Shanghai and Shenzhen Connect.

Trading under Shanghai Connect and Shenzhen Connect is subject to a Daily Quota. The same Northbound Daily Quota will be shared among A shares and ETFs that are included for Northbound trading in Stock Connect. Northbound trading and Southbound trading are respectively subject to a separate set of Daily Quota, which will be monitored by SEHK and SSE/SZSE respectively.

The Northbound Daily Quota is set at RMB 52 billion for each of Shanghai Connect and Shenzhen Connect, and the Southbound Daily Quota is set at RMB 42 billion for each of Shanghai Connect and Shenzhen Connect.

For details, please refer to Question 1.6 of the Stock Connect FAQ .

The Daily Quota limits the maximum net buy value of cross-boundary trades under Shanghai Connect and Shenzhen Connect each day. SEHK monitors the usage of the Northbound Daily Quota on a real-time basis, and the Northbound Daily Quota Balance is updated on HKEX’s website every minute and disseminated through Stock Connect Market Feed (SCM) of HKEX Orion Market Data Platform – Securities Market (OMD-C) at 5-second intervals: Daily Quota Balance = Daily Quota – Buy Orders + Sell Trades + Adjustments

The Daily Quota is reset every day. Unused Daily Quota is NOT carried over to the following day’s Daily Quota. For details, please refer to Question 1.8 of the Stock Connect FAQ.