The Hong Kong Securities and Futures Commission (SFC) and the China Securities Regulatory Commission (CSRC) have reached a consensus to commence preparations for an investor identification regime for southbound trading of the Mainland-Hong Kong Stock Connect (Stock Connect).

The regime is expected to be implemented “soon”, on a date to be announced, after rule amendments and other preparation work have been completed. The implementation was initially targeted for the first quarter of this year.

An investor identification regime for northbound trading is already in place – see our e-bulletin of 12 September 2018 and the HKEX dedicated webpage for further details. The launch date was subsequently postponed to 26 September 2018.

The regime is intended to improve cross-border market surveillance and will provide the SFC and the CSRC a direct and real-time line of sight into Stock Connect cross-market trades at the client level. This will facilitate regulation by the SFC and the CSRC for the purposes of maintaining the orderly operation of the Stock Connect and protecting investors.

Under the regime for southbound trading, it is expected that identification codes of investors who conduct trading will be transferred to the SFC and the Hong Kong stock exchange from the Shanghai and Shenzhen stock exchanges (and their respective subsidiaries and the China Securities Depositary and Clearing Corporation Limited). As with the regime for northbound trading, measures for the protection of client data will likely be incorporated.