The Stock Exchange of Hong Kong Limited (SEHK) and Hong Kong Securities Clearing Company Limited (HKSCC), wholly-owned subsidiaries of Hong Kong Exchanges and Clearing Limited (HKEx), signed an agreement (the Four-party Agreement) today (Thursday) with the Shanghai Stock Exchange (SSE) and China Securities Depository and Clearing Corporation Limited (ChinaClear) for the establishment of Shanghai-Hong Kong Stock Connect, a scheme that will allow investors with access to one market to buy and sell eligible shares listed on the other market.
Shanghai-Hong Kong Stock Connect has been developed in accordance with the principles set out in the joint announcement by Hong Kong’s Securities and Futures Commission (SFC) and China Securities Regulatory Commission (CSRC) on 10 April 2014 regarding their approval, in principle, of the development of a pilot programme for the establishment of mutual stock market access between Mainland China and Hong Kong.
The main content of the Four-party Agreement was explained in the circulars issued by SEHK and HKSCC on 29 April 2014. Further details of the agreement are available in the announcement HKEx published today and posted on the HKEx and HKExnews websites.
The Four-party Agreement was signed by HKEx Chief Executive Charles Li, SSE President Huang Hongyuan and ChinaClear General Manager Dai Wenhua. HKEx Chairman C K Chow, SSE Chairman Gui Minjie and ChinaClear Chairman Zhou Ming also attended and witnessed the signing.
“The agreement we signed today is another milestone in the development of Shanghai-Hong Kong Stock Connect,” said C K Chow. “We have made good progress since the joint announcement in April and we are confident that we can reach our goal as planned.”
“Following intensive research and negotiation, the Four-Party Agreement has been finally signed today. With this agreement, we have built up a complete framework for the Shanghai-Hong Kong Stock Connect business that clarifies all rights and responsibilities of the four related parties in terms of trading, clearing, custody and market surveillance. It is a milestone marking that the two exchanges and the two clearing houses have had consensus about the market mechanism and business arrangement. Our next step is to consolidate the technical preparations, release business rules and further conduct system testing for the launch of the programme,” said Gui Minjie.
Zhou Ming said, “The signing of the agreement shows that the preparations for Shanghai-Hong Kong Stock Connect are going full steam ahead to lay the final groundwork for the smooth launch of the scheme. At the same time, Shanghai-Hong Kong Stock Connect also marks an important step forward for the internationalisation of ChinaClear. After the approval of the CSRC, ChinaClear began establishing its wholly-owned subsidiary in Hong Kong. The subsidiary will focus on Shanghai-Hong Kong Stock Connect business to ensure the secure and efficient operations of the scheme.”
Charles Li said, “After the joint announcement by CSRC and SFC in early April, we knew we had to accomplish three important things before Shanghai-Hong Kong Stock Connect could be launched: signing a four-party framework agreement, incorporating the operating arrangements into the respective rules and getting final approvals from the regulators. Today’s signing of the Four-party Agreement indicates that we are getting closer to our goal. The agreement is the master document for the cooperation of the four parties, clearly spelling out the obligations and responsibilities of each party based on the principles set out in the joint announcement by the regulators. The agreement covers all the fundamentals. It’s a guide to how the programme will operate, as well as the base for the related rules governing trading and clearing under the programme.” Li added that HKEx also published related draft rule changes last month, hoping to receive regulators’ approval soon.
Implementation of the arrangements for the establishment of Shanghai-Hong Kong Stock Connect as set out in the Four-party Agreement, including the detailed terms for the trading and clearing links, is subject to all necessary approvals. We plan to officially launch Shanghai-Hong Kong Stock Connect after the relevant trading and clearing rules have been finalised, the relevant systems have been developed, all regulatory approvals have been granted, market participants have had sufficient opportunity to configure and adapt their systems, and all necessary investor education programmes are in place.
HKEx Chief Executive Charles Li (left), SSE President Huang Hongyuan (second from right) and ChinaClear General Manager Dai Wenhua (right) signed the Four-party Agreement for Shanghai-Hong Kong Stock Connect in Shanghai today. HKEx Chairman C K Chow (second from left), SSE Chairman Gui Minjie (third from left) and ChinaClear Chairman Zhou Ming (third from right) also attended and witnessed the signing.