Shanghai London Stock Connect
Connecting two of the world’s great economies

 

Shanghai-London Stock Connect brings together one of the world’s largest domestic capital markets with the leading international market. It allows global investors to benefit from China‘s growth through London, while London Stock Exchange listed companies can access Chinese investors directly.

The project represents a number of firsts:

  • The first time foreign companies can list in mainland China and the first time Shanghai Stock Exchange (SSE) listed companies can raise capital abroad through instruments fungible with their domestic shares.
  • The first time Chinese investors can access international stocks from within China without being subject to domestic capital controls.
  • The first time international investors can access China A-shares from outside Greater China and through international trading and settlement practices.

Shanghai-London Stock Connect has been developed jointly by SSE and LSEG, with the support of both the UK and Chinese governments and in collaboration with regulatory authorities.

By adopting new regulations and leveraging existing infrastructure we have built a programme that supports the development of a vibrant financial ecosystem connecting China, the UK and the wider global economy. We invite issuers, banks, brokers, asset managers, asset owners and professional services firms from both countries to learn more and participate in Stock Connect.

Trading GDRs on the Shanghai Segment

Trading GDRs on the Shanghai Segment

Shanghai Segment Trading Hours

Shanghai-London Stock Connect GDRs represent the first time an instrument fungible with a Chinese A Share can be traded outside China under international trading rules and free from quotas.

GDRs of Stock Connect are admitted to trading on the “Shanghai Segment” of the International Order Book (IOB). Trading currency can be USD, with RMB and GBP options possible.

Who can trade Stock Connect GDRs? All LSE IOB trading members are eligible to trade on the Shanghai Segment. Clients and members are able to use existing accounts and broker arrangements to trade the Connect GDRs. On book market makers can register on a security by security basis and provide two-way prices on screen under LSE rules. For more details please visit our IOB market making pages here.
When can Stock Connect GDRs be traded? The Shanghai Segment trading hours are from 9.00 to 16.30. Trading dates follow IOB schedule, which means trading is available on all London Stock Exchange business days. Please click here to view the IOB holiday and settlement calendar.
IOBS and IOBT segments These segments can be seen on the 3rd tab of Millennium Exchange and TRADEcho Business Parameters. Column H shows the relevant MIC code which is XLON if Regulated Market (security is UKLA listed) or XLOM if MTF (security is not UKLA listed). The document can be downloaded on the resources page.
Member firms should also refer to the Service Announcement issued on 26 November 2018 at https://www.londonstockexchange.com/resources/service-announcements
What are the Post Trade arrangements? Local trading will follow the Rules of London Stock Exchange, enabling global investors to have their first opportunity to trade Chinese securities under London rules and hours. Stock Connect clearing is through LCH and settlement is in Euroclear Bank. Settlement is on T+2 with no pre-funding and no pre-delivery requirements.
What are the Fees? Fees mirror the current IOB arrangement. For more details please view our Trading Services Price List. 

 

Cross-border trading of GDRs

Cross-border trading of GDRs

Shanghai-London Stock Connect uses Designated Brokers (referred to as ‘cross-border conversion institutions’ in SSE and CSRC rules) to enable the cross-border trading of the GDRs and the underlying A Shares. Designated Brokers ensure the fungibility of the scheme as they can access the underlying shares in China and trade GDRs in London.

Designated Brokers can create and redeem the GDRs through buying and selling the underlying in China, with the underlying being held by the Depositary Bank. However under CSRC rules, no redemption is allowed for the first 120 calendar days from the day of the GDR listing.

Home market rules apply when trading the underlying A Shares, meaning pre-funding and pre-delivery is required in China. To address the differences in settlement cycle, Designated Brokers will be able to hold cash and underlying shares as inventory to manage risk. Therefore, on a normal settlement cycle, GDR creation settles on T+2, while redemption takes T+3 days (this can be shortened to T+2 using inventory).

GDR Designated Brokers

GDR Designated Brokers

The process to become a Designated Broker is managed by Shanghai Stock Exchange. In order to apply for this role, a London Stock Exchange member firm must appoint a Shanghai Stock Exchange member firm in China to submit their application and supporting documents on their behalf.

The criteria to become a Designated Broker includes:

  • full membership of London Stock Exchange;
  • being a Qualified Foreign Institutional Investor (“QFII”) or RMB Qualified Foreign Institutional Investor (“RQFII”) or control, be controlled by, or be under common control with any entity which is a QFII or RQFII, except as otherwise prescribed by the Shanghai Stock Exchange;
  • being willing and able to comply with the regulatory requirements and relevant rules of the Shanghai Stock Exchange.

For a full list of the relevant rules and regulations please click here to view the Useful Assets section.

GDR Designated Brokers List

As of June 12, 2020 the following brokers have been approved by Shanghai Stock Exchange to act as GDR Designated Brokers:

Firm
China International Capital Corporation(UK)Limited (CICC)
Barclays Bank PLC
Haitong International(UK)Limited
CITIC Lyon Securities UK (CLSA (UK))
ICBC Standard Bank Plc
J.P. Morgan Securities Plc
HSBC Bank plc
Goldman Sachs International
Huatai Financial Holding (Hong Kong) Limited
Swiss Bank (UBS AG)
Macquarie Bank Limited (London Branch)
Sun Hung Kai Financial (UK) Limited

 

GDR Designated Broker applications are approved by Shanghai Stock Exchange (SSE). Please click here to view SSE's lists.

Trading CDRs in Shanghai

Trading CDRs in Shanghai

Shanghai-London Stock Connect represents the first time non-Chinese companies can be traded following local Chinese rules and practices.

Stock Connect CDRs will be traded on the Main Board of Shanghai Stock Exchange. Pre-funding and pre-delivery is required. The trading currency is RMB and Shanghai-London Stock Connect CDRs will initially not be used to raise additional capital.

Initial liquidity, including a regulatory minimum of 50 million units of CDRs worth 500 million RMB on day one of the listing, will be created by Chinese designated brokers accessing London’s secondary market.

 

Who can trade Stock Connect CDRs? All SSE members are eligible to trade CDRs on behalf of qualified investors (with at least 3 million RMB financial assets). Clients and members are able to use existing accounts and broker arrangements to trade Stock Connect CDRs. Designated brokers will act as market makers for the securities.
When can Stock Connect CDRs be traded? Trading hours in Shanghai are 09.15-11.30 and 13.00-15.00. CDRs will follow Shanghai Main Board trading dates, which means trading is available on all Shanghai Stock Exchange business days.
What are the Post Trade arrangements? Clearing and settlement of Stock Connect CDRs will be through China Clear. The settlement of securities is on T+0 and the settlement of cash on T+1. 
What are the Fees? Fees for trading of Shanghai-London Stock Connect CDRs can be viewed on Shanghai Stock Exchange’s website here.

 

Cross-border trading of CDRs

Cross-border trading of CDRs

Shanghai-London Stock Connect uses Designated Brokers (referred to as ‘cross-border conversion institutions’ in SSE and CSRC rules) to enable the cross-border trading of the CDRs and the underlying securities. Designated Brokers ensure the fungibility of the scheme as they can access the underlying in the UK and make CDR markets in Shanghai.

Designated Brokers are able to create and redeem the CDRs through buying and selling the underlying in London. Home market rules apply when trading the underlying securities, meaning securities settle on T+2. To address the differences in settlement cycle, Designated Brokers will be able to hold cash and underlying shares as inventory to manage risk. Furthermore, they are able to participate in the securities borrowing and lending market in London, trade over-the-counter securities and manage risk through various hedging tools. On a normal settlement cycle CDR creation settles on T+3. This can be streamlined to T+1 using borrowed stocks and over the counter trading, while redemption is on T+3.

CDR Designated brokers can open securities accounts with London Stock Exchange member firms in order to access the underlying in London. They also need to open a sub-custodian account in the UK through their mainland Chinese custodian.

CDR Designated brokers

CDR Designated brokers

CDR designated brokers are Shanghai Stock Exchange members firms which have obtained approval from Shanghai Stock Exchange to perform CDR creation and redemption. CDR designated brokers are also market makers in the Shanghai market.

Eligibility criteria include:

  • approval by the Shanghai Stock Exchange
  • CSRC approved and rated securities brokers
  • experience of international trading
  • ability to provide initial liquidity, market making services and bilateral quotation
  • licensed to engage in proprietary trading of securities;
  • classified as a BBB securities company or above in the most recent 2 years;
  • three or more years of experience in international securities business.

For a full list of the relevant rules and regulations please click here to view the Useful Assets section.

Meet the team

Jon Edwards

Head of Asia Pacific Primary Markets, London Stock Exchange plc

                                                                                                                           

Karen Northey

Head of China, International Markets

                                                                                                                                                             

Sabina Liu

Head of APAC Business Development, Cash Secondary Markets & UK Account Coverage

     

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