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Lately, the Shanghai Stock Exchange (SSE) officially revised and released the “SSE Measures for Piloting Shanghai-Hong Kong Stock Connect” (the “Measures” for short). For relevant background and content of revising the “Measures”, an SSE official answered the following questions raised by reporters.
1. Lately, the SSE has revised and released the “Measures”. What are the background and reason of revising it?
According to the “Amendment of Implementing Time Interval of Closing Auction in the Securities Market” released by the Stock Exchange of Hong Kong Ltd. (SEHK) on June 27, 2016, the SEHK will add the time interval of closing auction after the continuous trading session from July 25, 2016, which will apply to the securities in the prescribed scope. To match up the arrangement of relevant business, the SSE has revised the corresponding articles in the “Measures”.
2. What are the main contents of the SEHK’s closing auction mechanism?
The closing auction launched by the SEHK this time mainly adjusted the existing closing trading system, namely adding the time interval of closing auction after the continuous trading and adopting the call auction. Price limit for orders has been set up in the time interval of closing auction, namely, orders not conforming to the price limit will be canceled or refused. At the beginning of its implementation, the closing auction will only apply to the securities in the prescribed scope, while it will be gradually promoted step by step in the future.
3. What are the revised contents in the “Measures”?
According to the applicable principles of the rules of Shanghai-Hong Kong Stock Connect, unless otherwise provided, relevant trading and settlement are subject to the regulatory rules and business rules of the place where they occur. The adjustment of the trading rules by the SEHK mainly involves the order, auction and transaction rules of Hong Kong Stock Connect. Accordingly, 4 articles in the “Measures” have been revised, and the revised contents can be summarized in the following three aspects:
(1) Adding the time interval of closing auction in the trading time of the Hong Kong Stock Connect trading days in accordance with the SEHK’s revision to trading rules;
(2) Making clear that the order type that investors of Hong Kong Stock Connect can adopt in the time interval of closing auction is at-auction limit order;
(3) Making clear the intraday quota control mechanism in the time interval of closing auction, and stipulating that the follow-up buying orders will be neither accepted nor recovered on the day when the intraday quota is used up in the time interval of closing auction.
4. What arrangements will the SSE make after revising the “Measures”?
It is learnt that apart from adding the time interval of closing auction, the SEHK is planned to launch an adjustment mechanism for market fluctuations in 2016, though rules of which have not been officially released. The SSE will maintain close communication with the SEHK to make assessment on the adjustments to the businesses and rules in China’s mainland that might be related to the launch of the SEHK’s adjustment mechanism for market fluctuations. Besides, it will also join hands with securities companies to do a better job in education and publicity for investors of Shanghai-Hong Kong Stock Connect.
