Q: According to the Joint Announcement by the China Securities Regulatory Commission and the UK Financial Conduct Authority, securities institutions conducting cross-border conversion can hold cash and other specific classes of assets with an amount of no more than RMB 500 million in the other market for the purpose of shortening the conversion cycle and hedging market risks.
Will the underlying shares and corresponding cash for the cross-border redemption held by overseas securities institutions in the domestic market be calculated as part of the domestic assets balance?
A: According to the Joint Announcement by the China Securities Regulatory Commission and the UK Financial Conduct Authority, overseas securities institutions can hold cash and other specific classes of assets within certain quota for the purpose of shortening the conversion cycle and hedging market risks. Article 23 of Provisions on the Supervision and Administration of Depository Receipts under the Stock Connect Scheme between the Shanghai Stock Exchange and the London Stock Exchange (for trial implementation) further stipulates that overseas securities institutions engaging in cross-border conversion business may trade the corresponding shares of DRs and specified investment instruments in accordance with the regulations of competent authorities for the purpose of cross-border conversion and risk hedging. The outstanding assets held in the domestic markets shall not exceed the limit stipulated by CSRC. Where overseas securities institutions hold underlying shares and corresponding cash due to taking orders from their clients to carry out cross-border redemption, these underlying shares and corresponding cash are not included in the domestic asset balance.
(In case of any discrepancy between the Chinese version and the English version, the Chinese version shall prevail.)