China Issues Draft Bond Connect Transaction Rules for Public Comment
Yicai Global
/SOURCE : Yicai
China Issues Draft Bond Connect Transaction Rules for Public Comment

(Yicai Global) June 13 -- The responsible Chinese government agency has released the draft administrative rules for bond market transaction between Hong Kong and mainland China, i.e. Bond Connect transactions, to solicit the public's views.

The draft requires that the minimum bond quotation request amount transmitted by overseas investors must be USD14.5 million (CNY100 million), and the minimum bond change unit CNY1 million.

In Northbound Trading for overseas traders to buy mainland China's bonds on the Hong Kong market, Northbound Trading occur via cash bond transactions, and that tradeable bond types are the various bonds circulating in the inter-bank bond market and priced in yuan, the draft published on the website of China Foreign Exchange Trade System prescribes. It further directs that the basic flow of Northbound Trading is that overseas investors issue trade instructions via an overseas electronic transaction platform before finally concluding transactions with their counterparts within the transaction system. Transaction times for Northbound Trading should be that of the inter-bank bond market in mainland China, to wit 9.00-12.00 and 13.30-16.30 Beijing time on each transaction day, according to the draft.

The Bond Connect will initially open only its Northbound Trading platform, via which overseas investors can invest in the inter-bank bond market in mainland China through an interconnecting mechanism between Hong Kong and the mainland, a People's Bank of China directive mandates. The platform will expand to include the Southbound Trading channel in future, thus enabling domestic investors to also invest in Hong Kong's bond market.

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Keywords: Debt Markets , Financial Regulation , HK , Central Bank , Bond Connect