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HKEX Publishes Paper on Investor ID Model for Stock Connect Northbound Trading

Mutual Market
30 Nov 2017

Hong Kong Exchanges and Clearing Limited (HKEX) today (Thursday) published an information paper on an investor identification (investor ID) model for northbound trading through its mutual stock market access programmes with the exchanges in Shanghai and Shenzhen (Stock Connect).

The paper was posted on the HKEX website after the Hong Kong Securities and Futures Commission announced the Investor ID regime.

Overview of proposed model

  • Exchange Participants (EPs) assign a unique number in a standard format, known as the Broker-to-Client Assigned Number, or BCAN, to each of their clients1 in Stock Connect’s Northbound trading and provide Client Identification Data, or CID, to HKEX, which will forward the information to Mainland exchanges. 

  • EPs tag all buy and sell orders they submit with the appropriate BCAN.

  • BCANs and CID are for regulators’ market monitoring and surveillance only.  They will neither be used in clearing and settlement nor available for public viewing.

  • EPs have to obtain investors’ prescribed consent before using their personal data for this purpose.

Tentative implementation plan

  • Q4 2017 – Q2 2018: Market communications, system changes and rehearsals

  • Q3 2018: Rollout

Both the European Securities and Markets Authority and the US Securities and Exchange Commission have been in the process of implementing Investor ID regimes, as part of their Markets in Financial Instruments Directive II (MiFID II) and Consolidated Audit Trail (CAT) plans respectively. 

Implementation of Investor ID regime will enable more efficient Hong Kong-Mainland cross-border market surveillance.  Under the current arrangement between Hong Kong and the Mainland exchanges, there is a manual process by the Hong Kong exchange to enquire with the EP the investor’s identity. 

 “We think the current proposed model is a good approach for our market,” said Roger Lee, HKEX’s Joint Chief Operating Officer and Head of Markets.  “From making data privacy protection a top priority and allowing investors a choice to opt in to decentralising the assignment of investor ID numbers, we have struck a balance in meeting the regulatory requirements and addressing market participants’ concerns.”

For details of the Investor ID model, please see the information paper.

Notes:

  1. Generally only one BCAN is required if a client has more than one account with an EP.  However, a separate BCAN shall be used to identify any joint account held by such client. For a client who holds accounts with both the EP and any of its affiliates respectively, multiple BCANs can be assigned to the same client, but the different BCANs shall be mapped to the same CID.  EPs have to assign BCANs for themselves if they use Stock Connect’s Northbound trading for their own accounts.

 

Ends

Updated 25 Jan 2018

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