Recently, the Shanghai Clearing House ("SHCH") has issued the Detailed Operation Rules for the Registration, Custody, Clearing and Settlement for the Collaboration in the Mutual Bond Market Access between Mainland China and Hong Kong (for Trial Implementation) (the "Rules"), with immediate effect as approved by the People's Bank of China ("PBC").
The Rules stipulate that overseas investors from Hong Kong and other countries (regions) that intend to invest in the Mainland interbank bond market through the Bond Connect should satisfy PBC's requirements on the scope of relevant overseas investors. As designated by the PBC, the SHCH and the Hong Kong Monetary Authority ("HKMA") Central Moneymarkets Unit, through the connection between their infrastructures, provide overseas investors with registration, custodian, clearing and settlement services under the multi-level custodian pattern. Meanwhile, the Rules point out that overseas investors should trade and settle bonds in conformity with the range of counterparties, types of bonds that could be traded, and the scope of object bonds that could be invested as specified by the regulators. The settlement date for transactions through the Bond Connect will be subject to the holiday arrangement for the interbank bond market. In addition, the Rules clarify that overseas investors conducting bond trading through the Bond Connect should guarantee that sufficient bonds and funds will be available for settlement.