In order to further facilitate cross-border investment and financing, promote the global allocation of factor resources, and promote the institutional opening of the capital market, in February 2022, the China Securities Regulatory Commission(CSRC)officially issued the Provisions on the Supervision and Administration of Depository Receipts under the Stock Connect Scheme between Domestic and Overseas Stock Exchanges to strengthen the Stock Connect Scheme, and expand the scope of the depository receipt business from the main board of the London Stock Exchange to overseas markets including London, Germany and Switzerland.

The depository receipts under stock connect is a connectivity mechanism between the SSE and eligible overseas stock exchanges. At the initial stage, the stock connect allows eligible companies listed in each market to issue depository receipts (DRs) on the other exchanges. A depository receipt is a certificate issued by a depository bank,representing underlying shares in a foreign company and traded on a local stock exchange. The DRs under the stock connect includes a two-direction business, Chinese Depository Receipts (CDRs) business and Global Depository Receipts (GDRs) business. CDRs business refers to the qualified companies listed on overseas stock exchanges listing CDRs on the SSE Main Board, and GDRs business refers to the A-share companies listed on the SSE listing GDRs on overseas stock exchanges. The DRs and the shares are fungible, and realizing the interconnection between the two markets.

The issuance and listing of DRs under the stock connect are subject to local regulatory requirements, and issuers shall fulfill information disclosure obligations. Unlike the Shanghai-Hongkong Stock Connect mechanism, under which investors in Shanghai and Hongkong may trade shares directly on each other's markets, the DRs under stock connect can convert the shares of each other's markets into DRs so as to enable investors to trade locally. The transaction settlement arrangement of DRs is similar to that of equities traded on domestic market, so as to facilitate investors to complete transaction settlement in accordance with local trading practices and trading hours. Currently, CDR traders are subject to certain investor suitability requirements. Investors may have rights such as dividends, allotment, etc., and exercise voting right in accordance with the depository agreement. Domestic and overseas eligible brokers may apply for the license to conduct cross-border conversion in accordance with the relevant regulations.