RMB Equity Trading Support Facility

There is no mandatory requirement to use the FX Services. However, Participants who wish to utilize the TSF are required to comply with the registration criteria of SEHK and/or HKSCC (as the case may be).

For the purposes of trading RMB shares, the TSF will be available to the following types of Participants provided that they comply with the TSF Participant Registration Criteria of SEHK:

1) EPs who are themselves Direct Clearing Participants under the CCASS Rules and who comply with the TSF Participant Registration Criteria of HKSCC; and

2) EPs who are not Direct Clearing Participants but who have entered into a clearing agreement with a General Clearing Participant under the CCASS Rules and where the General Clearing Participant complies with the TSF Participant Registration Criteria of HKSCC.

EPs are referred to SEHK Rule 563H for further information.

For the purposes of clearing and settling trades concerning RMB shares, the TSF will be available to the following types of CCASS Participants provided that they comply with the TSF Participant Registration Criteria of HKSCC:

1) Direct Clearing Participants who are EPs under the SEHK Rules and who comply with the TSF Participant Registration Criteria of SEHK;

2) General Clearing Participants who have entered into a clearing agreement with an EP (who is a Non-Clearing Participant under the CCASS Rules) and where the EP complies with the TSF Participant Registration Criteria of SEHK; and

3) Custodian Participants who comply with the TSF Participant Registration Criteria of HKSCC.

A General Clearing Participant should ensure that the clearing agreement it enters into with Non-Clearing Participants include an obligation on its part to settle TSF supported trades and all corresponding TSF FX Transactions. The General Clearing Participant should also consider bringing a Non-Clearing Participant’s attention to the special features and restrictions of the TSF. Participants are referred to Rules 12A03 and 12A21 of the CCASS Rules for further information.

Investor Participants, Stock Lender Participants and Stock Pledgee Participants under the CCASS Rules will not be permitted to use the TSF at the initial stage.

A participant who has complied with the relevant criteria set out above is referred to as a “TSF Participant”.

Where an EP (who is a TSF Participant) wishes to use the FX Services in support of a share transaction on the OTP-C, the EP will effectively be entering into two separate transactions: (i) the transaction to buy or sell the relevant shares; and (ii) the FX transaction to buy or sell RMB (depending on whether the share transaction is a buy or a sell transaction). To indicate the use of the TSF service, an EP is required to input any order to buy or sell shares into OTP-C in the following manner:

An order to buy shares using the TSF service (“TSF Buy Orders”) must be input in the form of an At Auction Order (“AAO”) or a Special Limit Order (“SLO”) and be identified with the indicator “TSF” in the first three characters of the Reference field or BSS Broker Comment field at the time of input. Any TSF Buy Order which has not been input correctly will be considered invalid. Examples of an invalid TSF Buy Order include a buy order with an order type other than an AAO or a SLO but with the “TSF” indicator input, and a buy order in the form of an AAO or a SLO but without the “TSF” indicator input. Invalid TSF Buy Orders which have been matched will not be treated as TSF trades and Participants will be required to settle the relevant trades in RMB, not HKD.

An order to sell shares using the TSF Service (“TSF Sell Orders”) can be input in the form of any order type and must be identified with the indicator “TSF” in the first three characters of the Reference field or BSS Broker Comment field at the time of input. Any TSF Sell Order which has not been input correctly will be considered invalid, for example, sell orders of any order type without the “TSF” indicator input. Invalid TSF Sell Orders which have been matched will not be treated as TSF trades and sale proceeds will be settled in RMB, not HKD.

Only the trading of “TSF Stocks” and only TSF Participants are eligible for using the TSF. Before placing TSF orders, investors should ensure the RMB shares that they want to trade is on the “List of TSF Stocks” and their brokers are on the “List of TSF Participants”.

Investors should also check with their brokers the relevant terms, fees, operation flows and agreement that need to be signed for using the TSF.

Moreover, they should check the TSF RMB FX Rates or request brokers to advise them of the rates before instructing their brokers to use the FX Services. The TSF publishes RMB Indicative FX Rates and RMB Final FX Rates (along with the Fund Balance for “TSF BUY” and “TSF SELL”)* on the HKEX website on each trading day for TSF trades. The RMB Indicative FX Rates are available on the HKEX website at around 9:30 am (in respect of trades to be conducted in the pre-opening session and the morning session) and 1:00 pm (in respect of trades to be conducted in the afternoon session) and are for reference only. The RMB Final FX Rates are available after the close of the respective sessions for settlement between the TSF and the brokers. The RMB Final FX Rates will be equal to or better than the relevant Indicative FX Rates. As different rates will apply to different trading sessions, investors should check the applicable rates with their brokers for settlement of TSF trades.

Because of the “HKD in and HKD out” principle, investors should note that they MUST receive sale proceeds in HKD and not RMB unless a Stock Release Request is effected. Therefore, when selling RMB shares purchased through the use of the TSF, TSF Participants are obliged to use the FX Service for the conversion of the RMB sale proceeds to HKD prior to releasing the proceeds to investor clients. Investors should also note that physical certificates of RMB shares purchased with the support of the TSF cannot be withdrawn from CCASS unless they have been released from earmarking through the Stock Request Release procedure.

Furthermore, brokers are obliged to settle FX transactions with the TSF once a TSF order is matched. Investors may be required to make the same commitment to their brokers and should check with their brokers what arrangement applies.

*Note: The Fund Balances are static figures and are updated 3 times a day only. The market will be alerted when the Fund Balance drops to a prescribed level. Participating brokers should consider not accepting TSF Buy Orders when the TSF Services may be suspended soon due to the availability of fund. Also, participating brokers may receive RMB for their TSF Sell Orders if the trades are executed after the Fund Balance of “TSF BUY” drops to zero.

While a bid/ask rate will apply to each TSF Exchange Trade and the total value of TSF FX Transactions to be settled by a CCASS Participant (which must be a TSF Participant) is to be calculated on a gross basis, the money settlement amount applicable to a CCASS Participant will be paid on a net basis on each Business Day that HKSCC is open for business. The settlement cycle will follow the standard settlement cycle for equity securities listed and traded on SEHK, with RMB and HKD payments effected through existing CCASS settlement payment methods including RTGS and CCASS money settlement instructions.

To maximize the availability of RMB to the TSF for the provision of FX Services, it is a key feature of the TSF that only HKD is accepted for the purchase of RMB shares (via the FX Services from HKD to RMB); and only HKD is allowed to be paid as sale proceeds for the sale of those RMB shares (via FX Services from RMB to HKD) – the “HKD in and HKD out” principle.

For the purpose of maintaining the “HKD in and HKD out” principle, RMB shares purchased via the use of the TSF will automatically be transferred from the clearing account of a CCASS Participant (which is a TSF Participant) into a segregated stock account specifically designated as “TSF Account” in CCASS.  Shares transferred into a TSF Account are regarded as having been “earmarked”.  These earmarked shares can be transferred to the “TSF Account” of other CCASS Participants who are also TSF Participants (e.g. a custodian participant) via SI but not to other accounts.

Yes. Additional CCASS reports are provided including reports on confirmation of TSF Final FX Rates, money obligations for settlement of TSF Exchange Trades and details of TSF FX Transactions and Stock Release Requests made or input by CCASS Participants who are TSF Participants.

A broker can use ATI to transfer TSF Stocks under the following situations:

1) transfer between TSF Accounts 17 and 18;

2) transfer from any stock accounts to TSF Account 17 or 18 for quantity up to the quantity to be earmarked on the current day and the overdue TSF earmarking requirements.

However, transfer of TSF Stocks out of the TSF Accounts to other stock accounts by ATI is not allowed.

No. Participants are not allowed to transfer TSF Stocks out of their TSF Account. The transfer is normally done by CCASS automatically. The Participant is required to ensure that there are sufficient TSF Stocks in its TSF Principal Account 18 for de-earmarking.

If sufficient TSF Stocks are kept in the TSF Principal Account 18, TSF will transfer the net TSF Sell Stock Position automatically before each Batch-settlement-run from TSF Principal Account 18 to Clearing Account 01, until the full amount of shares for de-earmarking is being transferred.

If the stocks are kept in TSF Segregated Account 17 or with other participants, the Participant will need to transfer the stock to the TSF Principal Account 18 via ATI / SI.

Generally speaking, brokers will need to either arrange for RMB conversion in the FX market to complete the settlement with HKSCC and/or its clients; or to use the Stock Release Request to release earmarked shares from the TSF to rectify the erroneous input.

If a TSF CCASS Participant fails to settle any of its TSF FX Transaction, HKSCC is entitled to (1) not settle any of its corresponding money positions of the TSF FX Transaction in HKD or RMB; (2) take such action as it considers necessary to adjust, amend or reverse any TSF FX Transaction (in whole or in part) in respect of which the Participant has failed to settle; and (3) impose an exception handling fee on the Participant as it considers appropriate. Further, HKSCC is entitled to take other additional actions in specific circumstances.

Participants are referred to section 12A.8.1 of the CCASS Operational Procedures for further details.

‘Settlement account’ is not a matching field for SI. Therefore SIs with different ‘settlement accounts’ can still be matched. However, the status of such matched SIs will be automatically change to ‘FROZEN’ and will not be settled by CCASS.

Participants can enquire such frozen SI Positions via ‘Enquire Due / Overdue Position’ function, where ‘FROZEN’ will be displayed next to the POSITION TYPE. If required, Participants should re-input the SI for matching and settlement with its counterparty. FROZEN SI Positions will be purged after 14 calendar days.

No. Investor Participants do not have TSF Accounts for keeping earmarked TSF Stocks. Therefore, TSF Stocks cannot be transferred through ISIs.

Direct withdrawal of physical certificates is not allowed for earmarked TSF Stocks. CCASS Participants are required to de-earmark the earmarked TSF Stocks first and then withdraw physical certificates from a stock account other than the TSF Accounts.

The applicable conversion rates will be dependent on the time when Stock Release Requests are accepted by the TSF. If the requests are accepted by HKSCC at or before 12:00 noon on a trading day, the applicable conversion rate will be the RMB Buy Final FX Rate published by HKSCC at approximately 12:45 p.m. on that trading day. If the requests are accepted by HKSCC after 12:00 noon on a trading day, the applicable conversion rate will be the RMB Buy Final FX Rate published by HKSCC at approximately 4:45 p.m. on that trading day.