Haitong International Securities Group Limited | Shenzhen-Hong Kong Stock Connect

Shenzhen-Hong Kong Stock Connect

Shenzhen-Hong Kong Stock Connect is a securities trading and clearing links programme developed by the Stock Exchange of Hong Kong Limited (SEHK), Shenzhen Stock Exchange (SZSE), Hong Kong Securities Clearing Company Limited (HKSCC) and China Securities Depository and Clearing Corporation Limited (ChinaClear), aiming to achieve a breakthrough in mutual market access between the Mainland and Hong Kong. The programme comprises SZSE northbound trading and southbound trading.

SZSE northbound trading represents that investors are enable to engage Hong Kong brokers to trade prescribed shares listed on the Shenzhen Stock Exchange on their behalf via the SEHK Shenzhen special purpose vehicle who is liable to report to the Shenzhen Stock Exchange for related trading order (order transfer).

The China Securities Regulatory Committee (CSRC) and Securities & Futures Commission of Hong Kong (SFC) have issued a Joint Announcement on 25 November 2016 that the Shenzhen-Hong Kong Stock Connect will be launched on 5 December 2016.

Eligible Stocks

INDEX CONSTITUENT STOCKS	Constituent stocks of the SZSE Component Index and the SZSE Small/Mid Cap Innovation Index amounting to RMB 6 billion or above. ChiNext stocks: At the initial stage upon the launch of SZSE northbound trading, trading in shares listed on the ChiNext of the SZSE via SZSE northbound trading is only limited to institutional professional investors as defined in related Hong Kong regulations. Subject to the resolution of certain regulatory matters, trading in shares listed on the ChiNext of the SZSE will be made available via Shenzhen Stock Connect to other investors.
A+H SHARES	SZSE-listed shares and its corresponding H shares listed and traded on both SZSE and SEHK
EXCLUDING	All the SZSE-listed shares which are under “risk alert” SZSE-listed shares which are not traded in RMB

Please refer to SEHK website for the list of eligible stocks.

Sell-only SZSE Securities
If an SZSE security is removed from the list of eligible stocks for northbound trading, investors will only be allowed to sell the SZSE security but restricted from further buying. In addition, investors will only be allowed to sell SZSE securities but restricted from further buying if:

Such securities subsequently cease to be a constituent stock of the relevant indices; and/or
such securities, based on any subsequent periodic review, have a market capitalization of less than RMB6 billion; and/or
they are subsequently placed under risk alert; and/or
the corresponding H shares of such securities are subsequently delisted from SEHK, as the case may be.

Trading Rules and Restrictions

TRADING RULES FOR SZSE NORTHBOUND TRADING
TRADING AND SETTLEMENT CURRENCY	RMB
ORDER TYPES	Limit orders only
TICK SIZE	RMB 0.01
PRICE LIMIT	±10% of previous closing price ( or ±5% in the case of SZSE-listed stocks under risk alert:) Buy orders with input prices lower than 3% of the current best bid ( or last traded price in the absence of current best bid; or previous closing price in the absence of both current best bid and last traded price) will be rejected.
LOT SIZE	100 shares
MAXIMUM ORDER SIZE	1 million shares
SELL ORDER SIZE	Odd-lot selling is accepted¹
MONEY SETTLEMENT CYCLE	T+1
SECURITIES SETTLEMENT CYCLE	T-day
DAY TRADING	Not allowed
BLOCK TRADE	Not allowed
SHORT SELLING	Allowed
MARGIN FINANCING	Allowed
IPO PARTICIPATING	Not allowed
VOTING	Vote via CCASS’s existing voting functions

Remarks:
1. Odd lot trading is only available for sell orders and all odd lots should be sold in one single order. For example, you can only sell 7 shares or 107 shares if you hold 107 SZSE-listed shares in your account.

Trading Hours

Set out below are trading hours and arrangements for SZSE northbound trading:

SZSE TRADING SESSION	SZSE TRADING HOURS	SESSION FOR PLACING A SHARE ORDERS BY SEHK PARTICIPANTS
OPENING CALL AUCTION	09 : 15 – 09 : 25	09 : 10 – 11 : 30
CONTINUOUS AUCTION (MORNING)	09 : 30 – 11 : 30	09 : 10 – 11 : 30
CONTINUOUS AUCTION (AFTERNOON)	13 : 00 – 14 : 57	12 : 55 – 15 : 00
CLOSING CALL AUCTION	14 : 57 – 15 : 00	12 : 55 – 15 : 00

Remarks:

09:20-09:25 and 14:57-15:00: SZSE will not accept order cancellation.
09:10-09:15; 09:25-09:30; 12:55-13:00: orders and order cancellations by SEHK participants can be accepted but will not be processed by SZSE until SZSE’s market open.
Orders that are not executed during the opening call auction session will automatically enter the continuous auction session.

Investment Quota

Trading under the Shenzhen-Hong Kong Stock Connect is subject to quotas in order to control the speed and size of cross-boundary fund flows in the initial stage of the programme.

	SZSE NORTHBOUND TRADING
DAILY QUOTA	RMB 13 billion

PRINCIPLES

Quota is used on a first-come, first-served basis
Quota control only applies to buy orders, i.e. sell orders are always allowed regardless of quota level

DAILY QUOTA

When to calculate: real-time during trading hours
Daily quota balance: daily quota – buy orders + sell trades + adjustments¹
If daily quota is used up:
- During the opening call auction session (pre-opening): new buy orders will be rejected until daily quota balance resumes to a positive level (e.g. due to buy order cancellation).
- During the continuous auction session (continuous trading): buy order input will be suspended for the remaining of the day.
- During the closing auction session: buy order input will be suspended for the remaining of the day
- Buy orders already accepted will not be affected.

Remarks:
1. When a buy order is cancelled, rejected by the other exchange or executed at a better bid.

Daily Quota

Daily quota refers to the maximum net buy value of northbound trades via Shenzhen-Hong Kong Stock Connect each day, which means the used quota is calculated on a “net buy value” basis, namely the aggregate buy trades net of aggregate sell trades. Unused daily quota will not be carried over to the following day’s daily quota.

Quota is used on a first-come, first-served basis. Usage of daily quota will be calculated on a real-time basis during the trading session and northbound daily quota balance will be updated every time a northbound order is received and executed.

Daily quota balance = daily quota – buy orders + sell trades + adjustments (when a buy order is cancelled, rejected by the other exchange or executed at a better bid)

In case the daily quota is used up:

During the opening call auction session: new buy orders will be rejected. However, as order cancellation is common during opening call auction, the Northbound Daily Quota Balance may resume to a positive level before the end of the opening call auction. When that happens, SEHK will accept SZSE northbound buy orders again.

During the continuous auction session and closing auction session: buy order input will be suspended for the remaining of the day, but buy orders already accepted by SZSE’s trading system before such suspension will not be affected.

Relevant Fees and Levies

The following trading and settlement-related fees and levies will be applied only to trading of SZSE-listed shares via Shenzhen-Hong Kong Stock Connect:

ITEMS	RATE	CHARGED BY
Handling Fee	0.00487% of the consideration of a transaction per side	SZSE
Securities Management Fee	0.002% of the consideration of a transaction per side	CSRC
Transfer Fee	0.002% of the consideration of each transaction (Charged by ChinaClear) 0.002% of the consideration of each transaction (Charged by HKSCC)	ChinaClear & HKSCC
Stamp Duty	0.1% of the consideration of a transaction on the seller	SAT
Portfolio Fee*	0.008% of the total market value of SZSE-listed shares in the daily investment portfolio held in the account	HKSCC

Remarks: Fees are rounded to the nearest cent.

*Portfolio Fee is calculated by the total market value of SZSE-listed shares in daily investment portfolio, and is charged in Hong Kong dollars and on monthly basis.

Set out below are fees and levies to be confirmed with the relevant regulatory and tax authorities:

ITEMS	DESCRIPTION	CHARGED BY
New CCASS fee	A new fee regarding the provision of depository and nominee services to clearing participants for SZSE securities Subject to SFC’s approval	HKSCC
Dividend tax¹	Applicable to cash dividend and bonus issue Subject to clarification with SAT	SAT
Capital gain tax	Applicable to share disposal Subject to clarification with SAT	SAT

Remarks:
1. Dividend tax will be withheld by issuers of SZSE Securities and ChinaClear upon dividend payment.

Holiday Arrangement

For SZSE northbound trading, investors will only be allowed to trade on days where both markets are open for trading and banking services are available in both markets on the corresponding settlement days. The following table illustrates the holiday arrangement for SZSE northbound trading:

	MAINLAND	HONG KONG	OPEN FOR SZSE NORTHBOUND TRADING?
DAY-1	Business day	Business day	Yes
DAY-2	Business day	Business day	No	HK market closes on money settlement day
DAY-3	Business day	Public holiday	No	HK market closes
DAY-4	Public holiday	Business day	No	Mainland market closes

For the trading day on which Hong Kong market is open for half day trading only, SZSE northbound trading remains open until the closing of SZSE market.

Contingency Arrangement under Severe Weather Conditions

SCENARIOS	SZSE NORTHBOUND TRADING OF SZSE-LISTED SHARES	HONG KONG MARKET CURRENT ARRANGEMENT
T8 / BLACK RAINSTORM ISSUED BEFORE HK MARKET OPENS (I.E. 9:00 A.M.)	Not open	Not open
T8 ISSUED BETWEEN 9:00 A.M. AND 9:15 A.M.	Not open	Trading terminates after pre-opening session
T8 ISSUED AFTER SZSE MARKET OPENS (I.E. 9:15 A.M.)	Within 15 minutes after T8 issuance: trading continues as normal After 15 minutes from T8 issuance: new buy orders are no longer accepted and only cancellation of inputted buy orders is allowed until SZSE market closes	Trading terminates after 15 minutes
BLACK RAINSTORM ISSUED AFTER HK MARKET OPENS (I.E. 9:00 A.M.))	Trading continues as normal	Trading continues as normal
T8/ BLACK RAINSTORM DISCONTINUED AT OR BEFORE 12:00 NOON	Trading resumes after 2 hours	Trading resumes after 2 hours
T8/ BLACK RAINSTORM DISCONTINUED AFTER 12:00 NOON	Not open	Not open

Disclosure Obligations

Under the current PRC rules, when an investor holds or controls up to 5% of the issued shares of an SZSE-listed issuer, the investor is required to disclose his interest to the CSRC or related exchange in writing within three working days and inform related listed issuer. Such investor may not buy or sell the shares in the listed issuer within the said three-day period.

For such investor, every time when there is an increase or decrease in his shareholding by 5%, disclosure is required to be made within three working days (to the same parties and in the same manner as mentioned above).From the day the disclosure obligation arises to two working days after the disclosure is made, the investor may not buy or sell the shares in the listed issuer.

If a change in shareholding of the investor is less than 5% but results in the shares held or controlled by him falling below 5% of the total issued shares of the listed issuer, the investor is also required to disclose the relevant information within three working days.

Foreign Shareholding Restrictions

Under current Mainland rules, unless otherwise permitted by the relevant strategic investor regulations, a single foreign investor’s (i.e. QFII and RQFII) shareholding in a listed company is not allowed to exceed 10% of the company’s total issued shares, while all foreign investors’ shareholding in the A shares of a listed company is not allowed to exceed 30% of its total issued shares.

When the aggregate foreign shareholding of an individual A share reaches 26%, SZSE will publish notices on its website ().
If aggregate foreign shareholding exceeds the 30% threshold, the foreign investors concerned will be requested by the SZSE to sell the shares on a last-in-first-out basis within five trading days.
Foreign investors are defined as investors who are the Qualified Foreign Institutional Investor (QFII), RMB Qualified Foreign Institutional Investor (RQFII) or trade shares via the Shenzhen-Hong Kong Stock Connect programs
After the implementation of Shenzhen-Hong Kong Stock Connect, when aggregate foreign shareholding of an individual A share reaches 28%, SEHK will stop accepting further buy orders on that A share, until shareholding lowers to 26%.

If the aggregate foreign shareholding exceeds 30% and the excess is due to Shenzhen-Hong Kong Stock Connect, SEHK will notify the relevant exchange participants and request them to force-sell their shares. Even if the aggregate shareholding exceeds 30%, investors are allowed to sell SZSE Securities. If the aggregate foreign shareholding drops below the 30% threshold due to trading within 5 trading days, the exchange participants who have been requested to force-sell related shares can apply to the SEHK for a forced-sale exemption.

Risk disclosure

Stock Connect Supplement to Account Terms & Conditions and Stock Connect Risk Disclosure and other information

Customer is required to read and understand the Stock Connect Supplement of terms & conditions and Risk Disclosure and other information. For details, please refer to below documents:

Stock Connect Supplement to Cash Account and Leveraged Foreign Exchange Trading Account Terms & Conditions and Stock Connect Risk Disclosure and other information

Stock Connect Supplement to Margin Account and Leveraged Foreign Exchange Trading Account Terms & Conditions and Stock Connect Risk Disclosure and other information