Limitation of Mainland Investors participating Northbound Trading under Stock Connect

China Securities Regulatory Commission (CSRC), Shanghai Stock Exchange (SSE) Shenzhen Stock Exchange (SZSE) have announced their rule amendments (in Chinese only) in relation to restricting Mainland investors from Northbound Trading under Stock Connect with effect from 25 July 2022(the Effective Date).

According to the circular issued by HKEX on 24-6-2022, starting from 25-7-2022, China Connect Exchange Participants is not allowed to register new Broker-to-Client Assigned Number (BCAN) for clients who are Mainland investors. Mainland investors include: (a) individuals that possess Mainland ID documents; (b) holders of a joint account if one of the holders is considered as Mainland investor under (a); and (c) corporate or unincorporated entities which are registered in the Mainland.

According to the CSRC, SSE and SZSE:

- From the Effective Date, neither CCEPs nor TTEPs shall register new Broker-to-Client Assigned Number (BCAN) for clients who are Mainland investors, i.e. registration of new BCANs with ‘CHN’ as the country/ region of issuance (CHN BCANs) will be rejected;

- There will be a 1-year transitional period (from 25 July 2022 to 23 July 2023) from the Effective Date, during which Mainland investors with registered CHN BCANs could still buy and sell China Connect Securities through Northbound Trading under Stock Connect with the registered CHN BCANs;

- During the transitional period, Mainland investors with registered CHN BCANs who cannot buy or sell China Connect Securities through Northbound Trading due to exceptional circumstances including bankruptcy of their brokers could open Northbound Trading account at other CCEPs or TTEPs for new CHN BCANs registration; and

- After the transitional period (from 24 July 2023): (A) CCEPs and TTEPs shall delete all CHN BCANs for their clients who are Mainland investors, (B) Mainland investors shall not proactively buy any China Connect Securities through Northbound Trading under Stock Connect (including subscription for right issues (配股)), but excluding obtaining China Connect Securities passively as a result of corporate actions (such as distribution of stock dividends), and (C) Existing China Connect Securities held by Mainland investors could be sold by tagging the reserved value prescribed by the Exchange, the arrangements of which will be announced in due course.

The BCAN mentioned in this circular refers to the Broker-to-Client Assigned Number under the Northbound Investor ID Model only.