Joint Announcement of the Shanghai Clearing House and the Hong Kong Monetary Authority Central Moneymarkets Unit on the provision of the custody and settlement service for the Bond Connect

According to the ‘Joint Announcement of the People’s Bank of China and the Hong Kong Monetary Authority’, Shanghai Clearing House (SHCH) and the Central Moneymarkets Unit of Hong Kong Monetary Authority (CMU) jointly issue this announcement on the mutual access arrangement regarding custody and settlement under the Bond Connect:

1. SHCH is the bond market infrastructure institution authorised by the People’s Bank of China (PBoC) to provide the custody and settlement service for debt securities. CMU is the bond market infrastructure operated by the HKMA. SHCH and CMU will jointly provide the custody and settlement service for the Bond Connect through a connection between the two infrastructures.
2. Mutual access between SHCH and CMU with respect to the custody and settlement service will cover Northbound Trading in the initial phase. Overseas investors will be able to invest in the China Interbank Bond Market (CIBM) through the mutual access arrangement between CMU and SHCH. Relevant arrangements for Southbound Trading will be separately announced having regard to the directive of the Mainland and Hong Kong regulators.
3. Overseas investors investing in the CIBM through the Bond Connect shall hold their bonds using the nominee holding arrangement. SHCH is the ultimate central securities depository (CSD) and CMU will be the nominee holder of the bonds. A legal agreement will be signed between SHCH and CMU to set out the respective rights and obligations of the two entities under such an arrangement.
4. The scope of eligible investors and bonds for overseas investors investing in the CIBM through the Bond Connect shall be the same as that for overseas investors investing directly in the CIBM. All bonds registered and deposited in SHCH are eligible for investment under the Bond Connect.
5. SHCH provides the settlement service on a Delivery-versus-Payment (DvP) and gross settlement basis for overseas investors investing in the CIBM through the Bond Connect.
6. Information reporting in respect of SHCH, CMU and overseas investors investing in the CIBM through the Bond Connect will be carried out according to the requirements of the Mainland and Hong Kong regulators.
7. SHCH and CMU will prepare detailed operation rules specifying the requirements relating to custody and settlement for overseas investors participating in the Bond Connect. The detailed rules will be implemented upon approval by the Mainland and Hong Kong regulators.

19 May 2017