Pilot Mechanism for Mutual Connection of Transactions in Shanghai and Hong Kong Stock Markets

The latest improvement in Mainland and Hong-Kong relations was an announcement by the “China Securities Regulatory Commission” and the “Securities and Futures Commission of Hong Kong” to approve the initiation of the “Pilot Mechanism for Mutual Connection of Transactions in Shanghai and Hong Kong Stock Markets”, often called simply the "Shanghai-Hong Kong Connection".

This initiative is a joint effort made by, and in order to improve the cooperation between, both stock exchanges (the “Shanghai Stock Exchange” and the “Stock Exchange of Hong Kong Ltd.”) and both securities market dealers (the “China Securities Depository and Clearing Company Limited” and the “Hong Kong Securities Clearing Company Ltd.”).

The Shanghai-Hong Kong Connection is designed to follow the current laws and rules on trading settlement and operation modes in both the Shanghai and Hong Kong markets.

Although this is quite an encouraging initiative, it will be limited in its scope (at least in the beginning) as only domestic institutional investors and individual investors with a total balance of no less than CNY500,000 in securities accounts and funds accounts may participate in the Shanghai-Hong Kong Connection.