Recently, the National Interbank Funding Center ("NIFC") has issued the Trading Rules on the Bond Connect (for Trial Implementation) (the "Rules"), with immediate effect as approved by the People's Bank of China ("PBC").
According to the Rules, overseas investors making transactions through the Northbound Trading should meet requirements on access to the interbank bond market as stipulated in the Announcement of the People's Bank of China [2016]No.3, the Circular on Issues Concerning Investment of Foreign Central Banks, International Financial Institutions and Sovereign Wealth Funds with RMB Funds in the Inter-bank Market, and other regulations. The Rules make it clear that the type of bond transactions eligible for the Northbound Trading should be the spot bond trading, and the tradable bonds should be various bonds that are traded and circulated in the interbank bond market, including treasury bonds, local government bonds, central bank bonds and financial bonds. Also, the Rules point out that any transaction under the Northbound Trading should be made pursuant to basic processes as follows: an overseas investor gives a trading instruction through the overseas electronic trading platform , which will be then transmitted into the system of the trading center, and ultimately the transaction is concluded in the system of the trading center with the counterparty. Furthermore, the Rules provide for the market monitoring, disposal and information disclosure.