1 Measures of Shenzhen Stock Exchange for the Implementation of Shenzhen-Hong Kong Stock Connect Program (Exposure Draft) Chapter I General Provisions Article 1 These Measures are formulated in accordance with the Several Provisions on the Mutual Stock Market Access Mechanism between the Mainland and Hong Kong (hereinafter, Provisions) issued by the China Securities Regulatory Commission (hereinafter, CSRC), the Trading Rules of Shenzhen Stock Exchange (hereinafter, Trading Rules), the Membership Management Rules of Shenzhen Stock Exchange (hereinafter, Membership Rules) and other relevant rules of Shenzhen Stock Exchange (hereinafter, Exchange or SZSE) for the purpose of regulating the implementation of the Shenzhen-Hong Kong Stock Connect Program, preventing risk and protecting the legitimate rights and interests of investors. Article 2 Investors, the Exchange members, the securities trading service company (hereinafter, SEHK Securities Trading Service Company) established by the Stock Exchange of Hong Kong (hereinafter, SEHK), the securities trading service company established by the Exchange (hereinafter, SZSE Securities Trading Service Company) and other market participants shall comply with these Measures when they participate in the Shenzhen-Hong Kong Stock Connect Program and other relevant activities. Matters not prescribed in these Measures concerning the Shenzhen Connect trading under the Shenzhen-Hong Kong Stock Connect (excluding investors’ instruction for securities trading), the instruction for Hong Kong Connect trading under the Shenzhen-Hong Kong Stock Connect, and the client management of the Exchange members shall be governed by the Trading Rules, the Membership Rules and other relevant rules of the Exchange. Article 3 The Exchange exercises self-regulation of trading and other relevant activities carried out under the Shenzhen-Hong Kong Stock Connect Program. Chapter II Shenzhen Connect Trading
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Measures of Shenzhen Stock Exchange
for the Implementation of Shenzhen-Hong Kong Stock Connect Program
(Exposure Draft)
Chapter I General Provisions
Article 1 These Measures are formulated in accordance with the Several Provisions
on the Mutual Stock Market Access Mechanism between the Mainland and Hong
Kong (hereinafter, Provisions) issued by the China Securities Regulatory Commission
(hereinafter, CSRC), the Trading Rules of Shenzhen Stock Exchange (hereinafter,
Trading Rules), the Membership Management Rules of Shenzhen Stock Exchange
(hereinafter, Membership Rules) and other relevant rules of Shenzhen Stock
Exchange (hereinafter, Exchange or SZSE) for the purpose of regulating the
implementation of the Shenzhen-Hong Kong Stock Connect Program, preventing risk
and protecting the legitimate rights and interests of investors.
Article 2 Investors, the Exchange members, the securities trading service company
(hereinafter, SEHK Securities Trading Service Company) established by the Stock
Exchange of Hong Kong (hereinafter, SEHK), the securities trading service company
established by the Exchange (hereinafter, SZSE Securities Trading Service Company)
and other market participants shall comply with these Measures when they participate
in the Shenzhen-Hong Kong Stock Connect Program and other relevant activities.
Matters not prescribed in these Measures concerning the Shenzhen Connect trading
under the Shenzhen-Hong Kong Stock Connect (excluding investors’ instruction for
securities trading), the instruction for Hong Kong Connect trading under the
Shenzhen-Hong Kong Stock Connect, and the client management of the Exchange
members shall be governed by the Trading Rules, the Membership Rules and other
relevant rules of the Exchange.
Article 3 The Exchange exercises self-regulation of trading and other relevant
activities carried out under the Shenzhen-Hong Kong Stock Connect Program.
Chapter II Shenzhen Connect Trading
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Section 1 Participation of SEHK Securities Trading Service Company in
Shenzhen Connect Trading
Article 4 In order to participate in Shenzhen Connect trading, SEHK Securities
Trading Service Company shall apply to become an Exchange trading participant and
obtain a marketing unit, and shall comply with the Exchange’s relevant regulations on
the trading participants.
SEHK Securities Trading Service Company is not a member of the Exchange and thus
is not entitled to the Exchange members’ rights under laws, administrative regulations,
government department rules, regulatory documents, the Constitution of Shenzhen
Stock Exchange and Membership Management Rules.
Article 5 SEHK Securities Trading Service Company that applies to become an
Exchange trading participant shall submit the following documents:
(1) The Application Form and Letter of Undertaking;
(2) The approval documents issued by the CSRC and the Hong Kong Securities and
Futures Commission (hereinafter, SFC);
(3) Its Business License for Enterprise as a Legal Person;
(4) Its articles of association;
(5) Its management system and technical arrangement for Shenzhen Connect, and its
arrangement of appointing SEHK to take relevant responsibilities in respect of
Shenzhen Connect;
(6) The personal information on its directors, supervisors and senior officers;
(7) The Letter of Undertaking, technical standards and other requirements for SEHK
participants to participate in Shenzhen Connect;
(8) The settlement agreement between SEHK Securities Trading Service Company
and Hong Kong Securities Clearing Company Limited (hereinafter, HKSCC) on
Shenzhen Connect;
(9) The list of SEHK participants who intend to participate in Shenzhen Connect, and
a statement that such participants satisfy the technical standards and other
requirements;
(10) The fee collection method and fee structure for Shenzhen Connect; and
(11) Other documents as required by the Exchange.
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Article 6 SEHK Securities Trading Service Company shall route to the Exchange the
investors’ orders placed with SEHK participants for Shenzhen Connect trading and
bear the relevant trading responsibilities accordingly.
After the orders for Shenzhen Connect trading are executed on the Exchange, SEHK
Securities Trading Service Company shall acknowledge the trading results, accept the
trading report and send the same to relevant SEHK participants and HKSCC.
SEHK Securities Trading Service Company shall manage the trading activities of
SEHK participants in respect of Shenzhen Connect, and take necessary measures as
required by the Exchange against irregular trading activities under Shenzhen Connect.
Article 7 SEHK Securities Trading Service Company may appoint the SEHK to
perform the relevant duties prescribed in these Measures on its behalf, but shall still
be liable for insufficient or inappropriate performance of such duties.
Article 8 SEHK Securities Trading Service Company shall develop risk control
measures for Shenzhen Connect to enhance internal controls and prevent business
risks.
Article 9 SEHK Securities Trading Service Company shall establish the technical
standards and other requirements for SEHK participants to participate in Shenzhen
Connect, and test and assess the technical systems of the SEHK participants who
intend to participate in Shenzhen Connect.
Article 10 SEHK Securities Trading Service Company shall require the eligible
SEHK participants to sign the Letter of Undertaking on Shenzhen Connect. The Letter
of Undertaking shall include but not be limited to: complying with applicable laws,
administrative regulations, government department rules, regulatory documents and
operational rules of the Mainland China and Hong Kong; acknowledging and
implementing the relevant requirements imposed by SEHK Securities Trading Service
Company on the SEHK participants based upon the above provisions and the
agreements between the two parties, and requiring their clients to acknowledge and
implement relevant requirements through contracts or other arrangements;
acknowledging and requiring their clients to acknowledge through contracts or other
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arrangements the relevant regulations on the exemption of the Exchange from liability
as prescribed in these Measures and other rules of the Exchange.
Article 11 SEHK Securities Trading Service Company shall provide necessary
convenience and guidance for Shenzhen Connect investors and SEHK participants to
learn applicable laws, administrative regulations, government department rules,
regulatory documents, operational rules, business processes, and fee structures and
collection methods.
Article 12 SEHK Securities Trading Service Company shall comply with the
applicable laws, administrative regulations, government department rules, regulatory
documents and operational rules of the Mainland.
SEHK Securities Trading Service Company shall, in an appropriate manner, procure
that SEHK participants comply with the applicable laws, administrative regulations,
government department rules, regulatory documents of the Mainland and the
operational rules of the Exchange, and shall require SEHK participants to procure that
their clients shall so comply. It shall require SEHK participants to sufficiently disclose
to their clients the risks involved in Shenzhen Connect trading and the risks of
liability for violating the aforesaid laws, regulations or rules.
Article 13 When there is any change in the materials submitted by SEHK Securities
Trading Service Company to the Exchange under Article 5 of these Measures, SEHK
Securities Trading Service company shall submit the updated materials to the
Exchange within 3 Shenzhen Connect trading days after such change takes place.
SEHK Securities Trading Service Company shall provide reports on the operation of
Shenzhen Connect pursuant to the requirements of the Exchange.
Article 14 Where a material event occurs on the part of SEHK Securities Trading
Service Company and affects or may affect its business operation, it shall
immediately report to the Exchange stating the causes, current situation, possible
consequences and its response measures.
Article 15 SEHK Securities Trading Service Company shall properly keep the
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documents and materials produced as a result of the performance of its responsibilities
under these Measures, and shall, in an appropriate manner, require SEHK participants
to properly keep their clients’ materials and the clients’ instruction and order records
under Shenzhen Connect. Such documents and materials shall be kept for a minimum
period of 20 years.
Section 2 Eligible Shares for Shenzhen Connect
Article 16 The eligible shares for Shenzhen Connect include:
(1) The constituents of SZSE Component Index and SZSE Small/Mid Cap Innovation
Index with an average daily market capitalization of at least RMB 6 billion in the
6 months prior to the deadline for periodic review of the relevant index; or, if the
constituent stock has been listed within the 6 months prior to the periodic review
of the relevant index, its average daily market capitalization in the period since it
was listed shall be no less than RMB 6 billion; and
(2) SZSE-listed A shares of A+H companies that are dual-listed on the Exchange
and the SEHK Main Board.
Shares listed in the previous paragraph will not be included in Shenzhen Connect if
they are:
(1) Issued a risk alert by the Exchange (i.e., ST and *ST shares);
(2) Suspended from listing by the Exchange;
(3) In the pre-delisting period;
(4) Quoted and traded in foreign currencies (i.e. B Share); or
(5) In other special situation as recognized by the Exchange.
With the approved of the regulatory authority, the Exchange may adjust the scope of
eligible shares for Shenzhen Connect.
Article 17 Shares listed on the Exchange but not included in Shenzhen Connect that
fall within the first paragraph of Article 16 but outside the second paragraph of Article
16 of these Measures as a result of the adjustment of constituent stocks of relevant
indices shall be included in Shenzhen Connect.
With respect to a company listed on the SEHK Main Board (as H shares) that seeks
listing on the Exchange (as A shares), or of a company listed on the Exchange (as A
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shares) that seeks listing on the SEHK Main Board (as H shares), or a company that
seeks listing both on the Exchange (as A shares) and the SEHK Main Board (as H
shares) on the same trading day, its A shares may be included in Shenzhen Connect
after the A shares have been listed for 10 trading days and the company’s H shares
have passed the price stabilization period.
Article 18 Shenzhen Connect shares that fall outside the first paragraph of Article 16
or within the second paragraph of Article 16 of these Measures as a result of the
adjustment of constituent stocks of relevant indices shall be excluded from Shenzhen
Connect.
Article 19 The criterion of average daily market capitalization for A shares under (1)
of the first paragraph of Article 16 hereof is only applied at the time of periodic
adjustment of constituent stocks of relevant indices, with relevant shares included
under or excluded from Shenzhen Connect on the date of periodic adjustment.
The constituent stocks that meet the market capitalization threshold shall be
determined by the Exchange.
Article 20 SEHK Securities Trading Service Company shall publish the list of eligible
shares for Shenzhen Connect on the websites it designates. The inclusion or exclusion
of the shares shall take effect at the time published by SEHK Securities Trading
Service Company.
Section 3 Trading-specific Matters
Article 21 Shenzhen Connect shares are quoted and traded in RMB.
Article 22 The trading calendar and trading hours of Shenzhen Connect shall be
published by SEHK Securities Trading Service Company on the website it designates.
Article 23 Shenzhen Connect shares are traded on an auction basis, unless otherwise
prescribed by the Exchange.
Article 24 Orders for Shenzhen Connect shares shall be limit orders, unless otherwise
prescribed by the Exchange.
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The limit orders for Shenzhen Connect shares shall include such information as the
securities account number, the broker code, the securities code, buy or sell, quantity
and price.
The Exchange may require SEHK Securities Trading Service Company to provide
investors’ information in relation to their orders for regulatory purposes.
Article 25 The shares excluded from Shenzhen Connect under Article 18 of these
Measures but still listed on the Exchange may be sold, but not be purchased, through
Shenzhen Connect.
Article 26 The eligible shares for margin trading and covered short selling under
Shenzhen Connect shall be among the eligible securities for margin trading and short
selling on the Exchange.
Article 27 SEHK Securities Trading Service Company shall specifically flag short
selling orders covered by Shenzhen Connect shares.
The order price of covered short selling shall not be lower than the last execution
price of the same stock; in the absence of any executed trade on the given trading day,
the order price shall not be lower than the previous closing price.
SEHK Securities Trading Service Company shall procure that SEHK participants
require that the order price at which its clients sell the shares borrowed for covered
short selling shall meet the requirements in the previous paragraph if they sell such
shares before returning the same, except for the portion of the shares that exceed the
unreturned amount of borrowed shares.
Article 28 The covered short selling ratio of a single Shenzhen Connect share during
a single Shenzhen Connect trading day shall not exceed 1%; the cumulative covered
short selling ratio of a single Shenzhen Connect share over 10 consecutive Shenzhen
Connect trading days shall not exceed 5%. SEHK Securities Trading Service
Company shall perform pre-trade control based on the aforesaid percentage limits.
At the end of each Shenzhen Connect trading day, SEHK Securities Trading Service
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Company shall disclose the covered short selling ratios of Shenzhen Connect shares
on the websites it designates.
The Exchange may adjust the percentage limits set in the first paragraph of this
Article or suspend the acceptance of covered short selling orders for Shenzhen
Connect shares in line with market conditions.
Article 29 Where the Exchange suspends margin trading of a single Shenzhen
Connect share due to the reason that the monitoring indicator for margin trading of
this share reaches the specified level, the Exchange may require SEHK Securities
Trading Service Company to suspend routing orders for margin trading of this share.
Where the Exchange resumes margin trading of this share due to the reason that the
monitoring indicator for margin trading of this single share falls to the specified level,
the Exchange may inform SEHK Securities Trading Service Company to resume
routing orders for margin trading of this share.
Where the Exchange suspends short selling of a single Shenzhen Connect share due to
the reason that the balance of this share to be lent for short selling reaches the
specified level, the Exchange may require SEHK Securities Trading Service Company
to suspend routing orders for covered short selling of this share. Where the Exchange
resumes short selling of this share due to the reason that the balance of this share to be
lent for short selling falls to the specified level, the Exchange may inform SEHK
Securities Trading Service Company to resume routing orders for covered short
selling of this share.
Article 30 Non-trading transfer of Shenzhen Connect shares is not allowed except:
(1) The lending of Shenzhen Connect shares for covered short selling with a term of
less than one month;
(2) The one-day, non-renewable lending of Shenzhen Connect shares for pre-check
purposes within the scope of securities held by oneself;
(3) The transfer of Shenzhen Connect shares between an SEHK participant and its
clients to correct an erroneous trade;
(4) The allocation of Shenzhen Connect shares purchased by a fund manager
through the omnibus account to different fund accounts under its management;
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and
(5) Other circumstances prescribed by the Exchange and China Securities
Depository and Clearing Corporation Limited (hereinafter, CSDC).
Article 31 SEHK Securities Trading Service Company shall, in a proper manner,
require SEHK participants to ensure that there are sufficient securities available in
their clients’ accounts when accepting the clients’ sell orders, and not to accept any
sell order from those who do not have sufficient securities available in their accounts.
Article 32 The shares purchased under Shenzhen Connect shall not be sold before
settlement.
Article 33 SEHK Securities Trading Service Company and SEHK participants shall
not match by themselves the investors’ buy and sell orders for Shenzhen Connect
shares, and shall not, in any other forms, provide transfer services for Shenzhen
Connect shares at any venue other than the Exchange, save as otherwise prescribed by
the CSRC.
Article 34 The public information disclosed in respect of any securities trade
executed under Shenzhen Connect through SEHK Securities Trading Service
Company shall be labeled as “Only for Shenzhen Connect”.
Article 35 Without the permission of the Exchange, SEHK Securities Trading Service
Company shall not disclose the transaction information licensed by the Exchange to
itself to any entity or individual other than the SEHK participants and the clients of
SEHK participants for use, dissemination or for the development of indices or other
products.
SEHK Securities Trading Service Company shall, in an appropriate manner, require
SEHK participants to comply with the provisions in the previous paragraph and
procure that their clients shall so comply.
Article 36 SEHK Securities Trading Service Company shall pay handling fees and
other relevant fees for Shenzhen Connect trading as per the fee structure of the
Exchange.
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SEHK Securities Trading Service Company shall enter into an agreement with
HKSCC instructing HKSCC to conduct clearing and settlement and pay handling fees
and other relevant fees in respect of Shenzhen Connect trading on its behalf.
Article 37 Unless otherwise prescribed by the Exchange, the SZSE-listed shares that
are not included in Shenzhen Connect and are obtained as a result of equity
distribution or conversion of Shenzhen Connect shares, or acquisition of listed
companies under Shenzhen Connect may be sold, but not be purchased, through
Shenzhen Connect.
The non-SZSE-listed shares obtained as a result of equity distribution or conversion
of Shenzhen Connect shares, or acquisition of listed companies under Shenzhen
Connect are not allowed to be sold or purchased through Shenzhen Connect.
Article 38 The Exchange may adjust the trading methods, order types, order contents
and forms, business scope and trading limits, etc., for Shenzhen Connect in line with
market conditions.
Section 4 Quota Control
Article 39 SEHK Securities Trading Service Company shall monitor the usage of the
Shenzhen Connect daily quota on a real time basis and shall publish the same on the
designated website.
Article 40 The Shenzhen Connect daily quota balance shall be calculated as follows: