Measures for Shanghai-Hong Kong Stock Connect Pilot Program by the Shanghai Stock Exchange

Transcription

1 Measures for Shanghai-Hong Kong Stock Connect Pilot Program by the Shanghai Stock Exchange Disclaimer: The Chinese version of the rules issued by the Shanghai Stock Exchange shall prevail, while the English translation is for reference only. The Shanghai Stock Exchange makes no guarantee with regard to the accuracy or completeness of the English translation and shall not be held liable for any loss arising from investment or other activities based on such translation. Chapter I General Provisions Article 1 The Measures for the Shanghai-Hong Kong Stock Connect Pilot Program by the Shanghai Stock Exchange( the Measures ) is hereby formulated in accordance with the Provisions on the Shanghai-Hong Kong Stock Connect Pilot Program issued by the China Securities Regulatory Commission ( CSRC ), Trading Rules of the Shanghai Stock Exchange and other relevant rules of the Shanghai Stock Exchange ( SSE ) in order to regulate the Shanghai-Hong Kong Stock Connect Pilot Program, control risk and protect the legitimate rights and interests of investors. Article 2 Investors, SSE members, the securities trading service company ( SEHK Securities Trading Service Company ) 1

2 established by the Stock Exchange of Hong Kong ( SEHK ), the securities trading service company ( SSE Securities Trading Service Company ) established by the SSE and other market participants engaged in the Shanghai-Hong Kong Stock Connect Pilot Program and other relevant activities shall be governed by the Measures. Matters related to the Shanghai Stock Connect trading (excluding those related to investors order entrustment), the order entrustment for Hong Kong Stock Connect trading, the client management of SSE members and other matters not prescribed in the Measures shall be governed by the Trading Rules of the Shanghai Stock Exchange ( SSE Trading Rules ) and other relevant business rules of the SSE. Article 3 The SSE adopts self-regulation for the trading and other relevant activities of the Shanghai-Hong Kong Stock Connect Pilot Program. Chapter II Shanghai Stock Connect Trading Section 1SEHK Securities Trading Service Company s Participation in Shanghai Stock Connect Trading Article 4 To participate in Shanghai Stock Connect trading, SEHK Securities Trading Service Company shall apply for the qualification as an SSE Participant and obtain a Participant Business Unit ( PBU ), and shall comply with the SSE s rules for the Participants. SEHK Securities Trading Service Company is not a Member of SSE 2

3 and is not entitled to the SSE members rights under laws, regulations, rules, normative documents, Constitution of Shanghai Stock Exchange and SSE Rules for Members Management. Article 5 SEHK Securities Trading Service Company shall submit the following documents to apply to be an SSE Participant: 1. The Application Form and Letter of Commitment; 2. The approval documents issued by the CSRC and the Hong Kong Securities and Futures Commission ( SFC ); 3. The business entity license; 4. The articles of association/ incorporation; 5. The management system and technology arrangement for the Shanghai Stock Connect, and the arrangement of entrusting SEHK to take certain responsibilities in respect of Shanghai Stock Connect trading; 6. Profiles of directors, supervisors and senior executives. 7. The Letter of Commitment, technology standards and other requirements for SEHK Participants to participate in Shanghai Stock Connect trading; 8. The settlement agreement for Shanghai Stock Connect trading between SEHK Securities Trading Service Company and Hong Kong Securities Clearing Company Limited ( HKSCC ); 9. The list of SEHK Participants who plan to participate in Shanghai Stock Connect trading, and the statements that the above Participants satisfy the technology standards and other 3

4 requirements; 10. The fee structure and collection method for Shanghai Stock Connect trading; 11. Other documents required by the SSE. Article 6 SEHK Securities Trading Service Company shall route to the SSE the investors orders placed with SEHK Participants, and take the responsibilities related to Shanghai Stock Connect trading. After the orders for Shanghai Stock Connect trading are executed in the SSE, SEHK Securities Trading Service Company shall acknowledge the trading results, accept the trading returns and send the returns to relevant SEHK Participants and HKSCC. SEHK Securities Trading Service Company shall manage the trading activities of SEHK Participants in respect of Shanghai Stock Connect trading, and take necessary measures to deal with the violation in Shanghai Stock Connect trading as required by the SSE. Article 7 SEHK Securities Trading Service Company can entrust the SEHK to perform relevant duties stipulated in the Measures, but shall still bear the responsibilities if the aforesaid duties have failed to be fulfilled sufficiently or appropriately. Article 8 SEHK Securities Trading Service Company shall establish risk control measures for Shanghai Stock Connect trading, in order to enhance internal control and reduce business risks. 4

5 Article 9 SEHK Securities Trading Service Company shall set the technology standards and other requirements for SEHK Participants to participate in Shanghai Stock Connect trading, and conduct testing and assessment of the technology systems of those SEHK participants who plan to participate in Shanghai Stock Connect trading. Article 10 SEHK Securities Trading Service Company shall require the qualified SEHK Participants to sign Letter of Commitment for Shanghai Stock Connect trading. The Letter of Commitment shall include but not be limited to: complying with relevant laws, regulations, rules, normative documents and business rules of Mainland China and Hong Kong; accepting and implementing the relevant requirements set by SEHK Securities Trading Service Company based upon the above regulations and the agreements between the two parties, and requiring their clients to accept and implement relevant requirements through contracts or other arrangements; accepting and requiring their clients to accept through contracts or other arrangements relevant regulations on the exemption for the SSE stipulated in the Measures and other SSE business rules. Article 11 SEHK Securities Trading Service Company shall provide necessary assistance and guidance for Shanghai Stock Connect investors and SEHK Participants to learn relevant information including laws, regulations, rules, normative documents, business 5

6 rules, business processes, and fee structures and collection methods. Article 12 SEHK Securities Trading Service Company shall comply with relevant laws, regulations, rules, normative documents and business rules of Mainland China. SEHK Securities Trading Service Company shall, in an appropriate manner, supervise SEHK participants to and require SEHK participants to supervise their clients to comply with relevant laws, regulations, rules, normative documents and business rules of Mainland China and with SSE business rules, and shall require SEHK Participants to sufficiently disclose to their clients the risks of Shanghai Stock Connect trading and the risks of liability for violating the aforesaid regulations. Article 13 Should there be any changes to the contents of the documents SEHK Securities Trading Service Company submitted to the SSE under Article 5 of the Measures, the company shall submit renewed documents to the SSE within 3 trading days under Shanghai Stock Connect trading after the aforesaid changes occurred. SEHK Securities Trading Service Company shall provide reports on the operation of Shanghai Stock Connect according to the requirements of the SSE. Article 14 Should there be any significant event that affects or may affect the business operation of SEHK Securities Trading Service Company, the company shall immediately report to the SSE the 6

7 causes, current situation, possible consequences and solutions. Article 15 SEHK Securities Trading Service Company shall safe-keep the documents and materials generated from its performance of responsibilities stated in the Measures, and in an appropriate way require SEHK Participants to properly safe-keep their clients materials and the clients entrustment and order records under Shanghai Stock Connect trading for a minimum period of 20 years. Section 2 Shanghai Stock Connect Stocks Article 16 The Shanghai Stock Connect Stocks include: 1. The constituent stocks of SSE 180 Index; 2. The constituent stocks of SSE 380 Index; 3. SSE-listed A shares of A+H companies that are dual-listed on the SSE and the SEHK. The stocks that have been implemented risk alert by the SSE (i.e. ST, *ST and pre-delisting stocks), the stocks that are traded in foreign currencies (i.e. B Share) and other stocks recognized as special in the SSE s discretion shall not be included in Shanghai Stock Connect stocks. When approved by regulatory authorities, the SSE may adjust the scope of Shanghai Stock Connect stocks. Article 17 Due to the adjustment of constituent stocks for relevant indices, the stocks listed on the SSE but not included in Shanghai 7

8 Stock Connect stocks that become subject to the first paragraph of Article 16 but not to the second paragraph of Article 16 of the Measures shall be included in Shanghai Stock Connect stocks. The A shares of a company listed on the SEHK (as H shares) who seeks to list on the SSE (as A shares), or of a company listed on the SSE (as A shares) who seeks to list on the SEHK (as H shares), or of a company who seeks to list on the SSE (as A shares) and the SEHK (as H shares) on the same trading day can be included in Shanghai Stock Connect stocks after listing on the SSE for 10 trading days and after the price stabilization period of the company s H shares. Article 18 Due to the adjustment of constituent stocks for relevant indices, the stocks which are no longer subject to the first paragraph of Article 16 or become subject to the second paragraph of Article 16 of the Measures shall be excluded from Shanghai Stock Connect stocks. Article 19 SEHK Securities Trading Service Company shall publish the list of Shanghai Stock Connect stocks on the websites it designates, and the inclusion or exclusion of the stocks shall take effect at the time published by SEHK Securities Trading Service Company. Section 3 Special Trading Matters Article 20 All Shanghai Stock Connect stocks are quoted and traded in RMB. 8

9 Article 21 The trading calendar and trading hours of Shanghai Stock Connect stocks shall be published on the website designated by SEHK Securities Trading Service Company. Article 22 All Shanghai Stock Connect stocks are traded in the way of auction, unless otherwise prescribed by the SSE. Article 23 Shanghai Stock Connect trading orders shall be limit orders, unless otherwise prescribed by the SSE. The limit orders for Shanghai Stock Connect trading shall include the securities account, the broker code, the securities code, buy or sell, number of shares and prices etc. According to regulatory demands, the SSE can require SEHK Securities Trading Service Company to provide investors information in respect of their orders. Article 24 The stocks excluded from Shanghai Stock Connect stocks under Article 18 of the Measures but still listed on the SSE are allowed to be sold, but not to be bought, through Shanghai Stock Connect. Article 25 The eligible stocks for margin trading and covered short selling under Shanghai Stock Connect should be among the eligible securities for margin trading and short selling in the SSE s market. 9

10 Article 26 SEHK Securities Trading Service Company shall specifically identify covered short selling orders of Shanghai Stock Connect stocks. The order price of covered short selling shall not be lower than the latest execution price of the same stock; the order price of the stocks that have not been executed on the trading day shall not be lower than the closing price of the same stock on the previous trading day. SEHK Securities Trading Service Company shall ensure that SEHK Participants require their clients to sell the stocks borrowed for covered short selling before returning at an order price subject to the requirements in the paragraph above, except for the extra stocks that need not be returned. Article 27 The covered short selling proportion of a single Shanghai Stock Connect stock on a single Shanghai Stock Connect trading day shall not exceed 1%; the accrued covered short selling proportion of a single Shanghai Stock Connect stock for 10 consecutive Shanghai Stock Connect trading days shall not exceed 5%. SEHK Securities Trading Service Company shall perform pre-trade control according to aforesaid proportion limits. SEHK Securities Trading Service Company shall disclose the covered short selling proportion of Shanghai Stock Connect stocks on the websites designated by the Company at the end of each Shanghai Stock Connect trading day. According to the market situation, the SSE may adjust the proportion limit set in this Article or suspend the acceptance of covered short 10

11 selling orders for Shanghai Stock Connect stocks. Article 28 Should the SSE suspend the margin trading of a single Shanghai Stock Connect stock in the event that the monitoring indicator for margin trading of this stock reaches the assigned proportion, the SSE can require SEHK Securities Trading Service Company to suspend routing orders for margin trading of this stock. Should the SSE resume the margin trading of this stock in the event that the monitoring indicator for the margin trading of this single stock decreases to an assigned proportion, the SSE can inform SEHK Securities Trading Service Company to resume routing orders for the margin trading of this stock. Should the SSE suspend the short selling of a single Shanghai Stock Connect stock in the event that the balance of borrowed securities for the short selling of this stock reaches the assigned proportion, the SSE can require SEHK Securities Trading Service Company to suspend routing orders for the covered short selling of this stock. Should the SSE resume the short selling of this stock in the event that the balance of borrowed securities for the short selling of this stock decreases to an assigned proportion, the SSE can inform SEHK Securities Trading Service Company to resume routing orders for the covered short selling of this stock. Article 29 Non-trading transfer shall not be conducted with the following exceptions: 1. The borrowing or lending of Shanghai Stock Connect stocks 11

12 for covered short selling with a term of less than one month; 2. The borrowing or lending of Shanghai Stock Connect stocks within the scope of one s holding securities with a non-extendable term of one day only, to fulfill the pre-check requirement. 3. The stock transfer between an SEHK Participant and its clients to deal with erroneous trading. 4. The allocation of Shanghai Stock Connect stocks, bought by a fund fiduciary through the omnibus account, to different fund accounts under management. 5. Other situations identified by the SSE and China Securities Depository and Clearing Corporation Limited ( CSDC ). Article 30 SEHK Securities Trading Service Company shall, in a proper manner, require SEHK Participants to ensure that there shall be sufficient securities available in their clients accounts when accepting the clients sell orders, and shall not accept the sell orders from those who do not have sufficient securities available in their accounts. Article 31 The stocks bought under Shanghai Stock Connect trading shall not be sold before delivery. Article 32 SEHK Securities Trading Service Company and SEHK Participants shall not directly match investors buy and sell orders of Shanghai Stock Connect stocks, and shall not, in any other forms, 12

13 provide the transfer services of Shanghai Stock Connect stocks in any venue outside the SSE, unless otherwise prescribed by the CSRC. Article 33 The information disclosed in respect of Shanghai Stock Connect trading conducted through SEHK Securities Trading Service Company shall be labeled as Only for Shanghai Stock Connect trading. Article 34 Without permission by the SSE, SEHK Securities Trading Service Company shall not disclose the trading information which the SSE authorized the Company to any organization or person other than the clients of SEHK Participants for use, dissemination or the development of indices or other products. SEHK Securities Trading Service Company shall, in an appropriate manner, require SEHK Participants and urge them to require their clients to comply with aforesaid regulations. Article 35 SEHK Securities Trading Service Company shall pay relevant fees including handling fees for Shanghai Stock Connect trading according to the fee structure of the SSE. SEHK Securities Trading Service Company shall enter into an agreement with HKSCC to entrust HKSCC to conduct clearing and settlement, and pay handling fees and other relevant fees under Hong Kong Stock Connect trading. 13

14 Article 36 The SSE-listed stocks that are not included in Shanghai Stock Connect stocks but are obtained through the equity distribution, conversion of Shanghai Stock Connect stocks and acquisition of listed companies of Shanghai Stock Connect or abnormal situations can be sold, but not be bought, through Shanghai Stock Connect trading, unless otherwise prescribed by the SSE. The non-sse-listed stocks obtained through the equity distribution and conversion of Shanghai Stock Connect stocks, acquisition of listed companies of Shanghai Stock Connect or other situations cannot be sold or bought through Shanghai Stock Connect trading. Article 37 The SSE may, according to the market demand, adjust its trading methods, order types, order contents and forms, business scope and trading limits and etc., for Shanghai Stock Connect. Section 4 Quota Control Article 38 SEHK Securities Trading Service Company shall monitor the balance of the Shanghai Stock Connect Daily Quota on a real time basis and the Shanghai Stock Connect Aggregate Quota at the end of each trading day. SEHK Securities Trading Service Company shall publish the remaining balance of Quota on the designated website at the end of each trading day. Article 39 The formula for calculating the Shanghai Stock Connect Daily Quota Balance: Daily Quota Balance = Daily quota-buy Orders + Sell Trades + Buy Orders cancelled by relevant participants 14

15 or rejected by the SSE + Margin between the execution prices and declared prices of buy orders. Article 40 Once the Shanghai Stock Connect Daily Quota is used up during the opening auction session, no further buy orders will be accepted for the remainder of the session, but sell orders will be accepted. Before the continuous call auction session, once the Shanghai Stock Connect Daily Quota Balance returns to a positive level due to cancellation or rejection by the SSE of buy orders or execution of sell orders, SEHK Securities Trading Service Company will again accept Shanghai Stock Connect buy orders. Once the Shanghai Stock Connect Daily Quota is used up during the continuous auction session, no further buy orders will be accepted for the remainder of the day, but sell orders will be accepted. When that happens, SEHK Securities Trading Service Company will not resume the acceptance of buy orders for the remainder of the day, unless otherwise prescribed by the SSE. Article 41 The formula for calculating the remaining balance of the Shanghai Stock Connect Aggregate Quota: Aggregate Quota Balance = Aggregate Quota Aggregate Buy Trades + Aggregate Sell Trades. Aggregate sell trades refer to the total amount calculated by multiplying the sell orders by average buy price. The SSE may adjust the calculation methods aforesaid according to market demands. 15

16 Article 42 Should Aggregate Quota balance be less than Daily Quota, Shanghai Stock Connect buying will be suspended since the next Shanghai Stock Connect trading day. However, sell orders will still be accepted. SEHK Securities Trading Service Company will resume accepting Shanghai Stock Connect buy orders since the next Shanghai Stock Connect trading day after the Aggregate Quota balance returns to the Daily Quota level or above. Article 43 The SEHK shall, in a proper manner, require SEHK Participants and urge them to require their clients to prevent vicious usage of quota in ways such as placing large buy orders at low prices when participating in Shanghai Stock Connect trading. Section 5 Shareholding Proportion Article 44 Investors participating in the Shanghai Stock Connect trading shall follow the shareholding proportion limits prescribed in the Provisions on the Shanghai-Hong Kong Stock Connect Pilot Program. Article 45 SEHK Securities Trading Service Company shall properly urge SEHK Participants, in the case of investors violation of shareholding proportion limits, to reject the investors orders, close their positions or take any other effective measures to curb and correct such violations. 16

17 Article 46 When an investor fulfills information disclosure obligations according to relevant regulation, the shares of the same company listed both home and abroad and held by the investor through the Shanghai Stock Connector other channels shall be combined. Article 47 At the end of each trading day, once a foreign individual investor holds in total more shares of the same listed company than the proportion limit, after combining both shares obtained through the Shanghai Stock Connect and through other channels, the investor shall close the position of the exceeding shares and fulfill the information disclosure obligations within 5 trading days. Article 48 At the end of each trading day, once all foreign investors combined shareholding of the same listed company s shares both through the Shanghai Stock Connect and through other channels exceeds the proportion limit, the SSE will notify SEHK Securities Trading Service Company and other foreign investors to close the position of the exceeding shares in the principle of last in first out. SEHK Securities Trading Service Company shall timely notify SEHK s participants and urge them to notify their investors. Investors shall close the position of their exceeding shares within 5 trading days after receiving such notices. Once the combined shareholding falls below the proportion limit within 5 Shanghai Stock Connect trading days due to other foreign investors voluntary reduction of holding, SEHK Securities Trading 17

18 Service Company can ask the SSE to allow the original shareholders to maintain their shareholding either proactively or according to requests made through SEHK Participants by investors already notified to reduce their shareholding. Article 49 In case that investors in the Shanghai Stock Connect fail to dispose of exceeding shares according to the rules, SEHK Securities Trading Service Company shall urge SEHK participants to close such position. Chapter III Hong Kong Stock Connect Trading Section 1 SSE Members Participation in Hong Kong Stock Connect Article 50 SSE Members participating in Hong Kong Stock Connect shall meet the technical standards and other requirements set by SSE Securities Trading Service Company. Article 51 SSE Members participating in the Hong Kong Stock Connect shall sign the Hong Kong Stock Connect service contract with SSE Securities Trading Service Company to define their respective rights and responsibilities. Article 52 Rules governing management of clients trading activities by SSE Members are applicable to SSE Members participating in the Hong Kong Stock Connect. 18

19 Article 53 SSE Members shall fully inform the clients of the investment risks of Hong Kong Stock Connect, urge clients to comply with relevant laws, regulations, rules, normative documents and business rules of Mainland China and Hong Kong, and to accept the supervision by the SSE. Article 54 SSE Members may terminate Hong Kong Stock Connect service contract with SSE Securities Trading Service Company in accordance with relevant agreements, but shall make proper arrangements with their clients. Article 55 SSE Securities Trading Service Company can enter into agreement with SSE Members, whereby SSE Securities Trading Service Company reserves the right to suspend Hong Kong Stock Connect service or terminate Hong Kong Stock Connect service contract should any of the following listed situations occur: 1.SSE Member s violation of relevant laws, regulations, rules, normative documents and business rules of Mainland China and Hong Kong. 2.SSE Member s failure to cooperate with SSE s investigations, obtaining evidence or other regulatory measures regarding Hong Kong Stock Connect trading imposed by the SSE. 3. SSE Member s inability to provide clients with Hong Kong Stock Connect trading services due to major failures in relevant business or technology system. 19

20 4. Other situations as defined in the agreement. Article 56 SSE Securities Trading Service Company can entrust the SSE to perform relevant duties stipulated in the Measures, but shall still bear the responsibilities if the aforesaid duties have failed to be fulfilled sufficiently or appropriately. Section 2 Hong Kong Stock Connect Stocks Article 57 The Hong Kong Stock Connect stocks include: 1. The constituent stocks of the Hang Seng Composite LargeCap Index; 2. The constituent stocks of the Hang Seng Composite MidCap Index; 3. SEHK-listed H shares of A+H companies that are dual-listed on the SSE and the SEHK. The H shares of A+H companies whose A shares have been implemented risk alert by the SSE, stocks of issuers who have stocks that are dual-listed on Mainland stock exchanges other than the SSE,SEHK-listed stocks which are quoted and traded in currencies other than HKD and other stocks recognized as special in the SSE s discretion shall not be included in Hong Kong Stock Connect stocks. When approved by regulatory authorities, the SSE may adjust the scope of Hong Kong Stock Connect stocks. Article 58 Due to the adjustment of constituent stocks for relevant 20

21 indices, the stocks not included in Hong Kong Stock Connect stocks that become subject to the first paragraph of Article 57 but not to the second paragraph of Article 57 of the Measures shall be included in Hong Kong Stock Connect stocks. The H shares of a company listed on the SSE (as A shares) who seeks to list on the SEHK (as H shares), or of a company listed on the SEHK (as H shares) who seeks to list on the SSE (as A shares), or of a company who seeks to list on the SSE (as A shares) and the SEHK (as H shares) on the same trading day can be included in Hong Kong Stock Connect stocks after the price stabilization period of the company s H shares and after listing on the SSE for 10 trading days. Article 59 Due to the adjustment of constituent stocks for relevant indices, the stocks which are no longer subject to the first paragraph of Article 57 or become subject to the second paragraph of Article 57 of the Measures shall be excluded from Hong Kong Stock Connect stocks. Article 60 SSE Securities Trading Service Company shall publish the list of Hong Kong Stock Connect stocks on the websites it designates, and the inclusion or exclusion of the stocks shall take effect at the time published by SSE Securities Trading Service Company. Section 3 Special Trading Issues Article 61 Investors shall participate in the Hong Kong Stock 21

22 Connect trading through SSE RMB common stock accounts. Article 62 Hong Kong Stock Connect trading is quoted in HKD and settled in RMB. Article 63 The trading calendar and trading hours of Hong Kong Stock Connect stocks shall be published on the website designated by SSE Securities Trading Service Company. Trading hours include pre-opening session and continuous trading session, subject to SEHK s regulation. Where any special circumstance recognized by SSE Securities Trading Service Company leads to or may lead to suspension of Hong Kong Stock Connect trading, SSE Securities Trading Service Company may adjust the trading calendar and trading hours of Hong Kong Stock Connect, and make an announcement to the market. Article 64 Hong Kong Stock Connect trading is conducted through SEHK s Automatic Order Matching System, but odd lots held by investors can only be sold through SEHK s Semi-Automatic Order Matching System for odd lots. When trading through SEHK s Automatic Order Matching System, investors shall place at-auction limit orders in SEHK s pre-opening session and enhanced limit orders in SEHK s continuous auction session. Article 65 Order size of Hong Kong Stock Connect stocks shall be 22

23 one trading unit or its integral multiples, except for selling odd lots. Article 66 The stocks excluded from Hong Kong Stock Connect stocks under Article 59 of the Measures but still listed on the SEHK are allowed to be sold, but not to be bought, through Hong Kong Stock Connect. Article 67 Hong Kong Stock Connect stocks bought by investors can be sold before settlement on the same trading day once the transaction is confirmed. Article 68 Hong Kong Stock Connect trading follows a comprehensive designated trading system, and is subject to the SSE s regulations about designated trading. Investors initiating or changing designated trading cannot start Hong Kong Stock Connect trading till the next trading day. Article 69 Third-party deposit of customers settlement funds is applied in Hong Kong Stock Connect trading and is subject to A-share trading rules and regulations. Article 70 Members shall ensure that clients have sufficient RMB funds or securities available in their accounts before accepting clients Hong Kong Stock Connect orders. Members are prohibited from accepting orders of buying or selling securities in the market from clients whose funds or securities are not sufficiently available in the 23

24 accounts. Article 71 SSE Securities Trading Service Company and SSE Members shall not directly match investors buy and sell orders of Hong Kong Stock Connect, and shall not, in any other forms, provide the transfer services of Hong Kong Stock Connect stocks in any venue outside the SEHK, unless otherwise prescribed by the CSRC. Article 72 Once the orders of Hong Kong Stock Connect stocks are placed, their prices or sizes cannot be changed. However, during the order cancellation period allowed by the SEHK, orders that are not executed can be withdrawn. Article 73 To participate in Hong Kong Stock Connect, members shall submit orders to the SEHK through SSE Securities Trading Service Company. After receiving trading results and other records from the SEHK, SSE Securities Trading Service Company will send these results and records to SSE Members, who will send the above information to their clients. Article 74 All information about Hong Kong Stock Connect, including real-time quotation of stocks, will only be released by the SEHK. Without permission by the SEHK, any Member or other organization recognized by the SSE shall not disclose the trading information that 24

25 the SEHK authorized them to any organization or person other than their clients for use, dissemination or the development of indices or other products. Article 75 Members shall properly safe-keep materials including orders and placement records according to relevant rules. Article 76 To participate in Hong Kong Stock Connect, investors shall pay commission to their entrusted members and bear trading fee, trading system usage fee and other fees according to the SEHK s fee charging standards. Article 77 The SEHK-listed stocks that are not included in Hong Kong Stock Connect stocks but are obtained through the equity distribution, conversion of Hong Kong Stock Connect stocks and acquisition of listed companies of Hong Kong Stock Connect or abnormal situations can be sold, but not be bought, through Hong Kong Stock Connect trading, unless otherwise prescribed by the SSE. When SEHK-listed call warrants of SEHK-listed stocks are obtained through issuers rights issue, equity distribution or conversion, they can be sold through Hong Kong Stock Connect and exercised in accordance with the CSRC and the CSDC s relevant regulations. The non-sehk-listed stocks obtained through the equity distribution and conversion of Hong Kong Stock Connect stocks, acquisition of listed companies of Hong Kong Stock Connect or 25

26 other situations cannot be sold or bought through Hong Kong Stock Connect trading. Article 78 The SSE may, according to market demand, adjust its trading methods, order types, business scope and trading limits and etc., for Hong Kong Stock Connect. Section 4 Quota Control Article 79 SSE Securities Trading Service Company shall monitor the balance of the Hong Kong Stock Connect Daily Quota on a real time basis and the Hong Kong Stock Connect Aggregate Quota at the end of each trading day. SSE Securities Trading Service Company shall publish the remaining balance of Quota on the designated website at the end of each trading day. Article 80 The formula for calculating the Hong Kong Stock Connect Daily Quota Balance: Daily Quota Balance = Daily quota -Buy Orders + Sell Trades + Buy Orders cancelled by relevant Members or rejected by the SEHK + Margin between the execution prices and declared prices of buy orders. Buy orders, sell trades, buy orders cancelled by relevant Members or rejected by the SEHK, and margin between the execution prices and order prices of buy orders mentioned above shall be calculated in RMB converted from HKD according to the reference exchange rate provided by the CSDC before trading starts on each trading day. 26

27 Article 81 Once the Hong Kong Stock Connect Daily Quota Balance is used up during the pre-opening session, no further buy orders will be accepted for the remainder of the session and will not be resumed before the end of the above session, but sell orders will be accepted. Once the Hong Kong Stock Connect Daily Quota Balance is used up during the continuous auction session, no further buy orders will be accepted for the remainder of the day, but sell orders will be accepted. When that happens, SSE Securities Trading Service Company will not resume the acceptance of buy orders for the remainder of the day, unless otherwise prescribed by the SSE. Article 82 The formula for calculating the remaining balance of the Hong Kong Stock Connect Aggregate Quota: Aggregate Quota Balance = Aggregate Quota Aggregate Buy Trades + Aggregate Sell Trades. The aggregate buy trades and aggregate sell trades mentioned above are calculated in RMB converted from HKD at the exchange rates of settlement provided by the CSDC at the end of each trading day. Aggregate sell trades refer to the total amount calculated by multiplying the sell orders by average buy price. The SSE may adjust the calculation methods aforesaid according to market demands. Article 83 Should Aggregate Quota Balance fall below the Daily Quota, buy orders of Hong Kong Stock Connect will be suspended on the next trading day. However, sell orders will still be accepted. 27

28 SSE Securities Trading Service Company will resume accepting Hong Kong Stock Connect buy orders on the next Hong Kong Stock Connect trading day after the Aggregate Quota balance returns to the Daily Quota level or above. Article 84 Investors shall refrain from manipulating quota in ways such as sending large buy orders at low prices when participating in Hong Kong Stock Connect trading. Section 5 Investor Eligibility Management Article 85 Institutional investors participating in Hong Kong Stock Connect Trading shall abide by relevant laws, regulations, rules, normative documents and business rules. Article 86 To participate in Hong Kong Stock Connect Trading, individual investors shall at least satisfy the following criteria: 1. The combined value of assets in securities and cash accounts shall be no less than 500 thousand Yuan; 2. No seriously blemished credit records; 3. Not being prohibited or restricted from participating in Hong Kong Stock Connect trading by any relevant laws, regulations, rules, normative documents and business rules. The SSE preserves the right to adjust the aforesaid criteria according to the market condition. Article 87 Investors participating in Hong Kong Stock Connect 28

29 trading shall be familiar with relevant regulations of Hong Kong stock market and business rules and procedures regarding Hong Kong Stock Connect trading, set out investment targets according to their risk preferences and conduct objective evaluation of their own risk tolerance. Article 88 SSE Members shall formulate the investor eligibility management standards, procedures, methods and protective measures for enforcement of investor eligibility system under Hong Kong Stock Connect. The aforesaid standards shall include but not be limited to investor s asset condition, educational background and risk tolerance. Article 89 SSE Members shall introduce the rules and regulations and market features of Hong Kong securities market as well as the business rules and procedures concerning Hong Kong Stock Connect trading to the clients in a thorough and objective way. Article 90 SSE Members shall sign entrustment agreement with clients participating in the Hong Kong Stock Connect trading, which stipulates the due rights and obligations of the two parties. Prior to the signing of the entrustment agreement, SSE Members shall thoroughly disclose the trading risks of Hong Kong Stock Connect to their clients, and require their clients to sign the letter of risk disclosure. Required provisions for the entrustment agreement and the letter of 29

30 risk disclosure will be otherwise stipulated by the SSE. Section 4 Handling of Abnormal Trading Article 91 When trading abnormality recognized by the SSE, causing or may cause full or partial interruption to Shanghai Stock Connect trading occurs, the SSE reserves the rights to suspend the trading of Shanghai Stock Connect Stocks, to cease to accept all or part of Shanghai Stock Connect trading orders, or to close the SSE trading platform temporarily, and will make public announcements accordingly. When trading abnormality recognized by the SSE Securities Trading Service Company, causing or may cause complete or partial interruption to Hong Kong Stock Connect trading occurs, SSE Securities Trading Service Company reserves the rights to partially or completely suspend the Hong Kong Stock Connect trading service temporarily, and will make public announcements accordingly. After the discontinuation of the cause which led to trading suspension, closing of the SSE market and the suspension of Hong Kong Stock Connect service by SSE Securities Trading Service Company, the SSE has the discretion to resume the Shanghai Stock Connect trading and SSE trading market, and to make a public announcement accordingly. Therefore SSE Securities Trading Service Company has the discretion to resume the provision of Hong Kong Stock Connect service, and to make a public announcement accordingly. 30

31 Article 92 In cases where the buying or selling amount of Shanghai Stock Connect stocks goes beyond a certain value within a short period of time, which causes trading abnormality as defined in SSE business rules, the SSE can adopt responsive measures under relevant regulations. Article 93 When trading abnormality recognized by the SEHK, causing or may cause complete or partial interruption of Hong Kong Stock Connect trading occurs and SEHK temporarily closes the market before resumption of trading or takes other measures, SSE will forward publicly the announcement by SEHK upon receiving its notifications. When trading abnormality recognized by the SEHK Trading Service Company causing or may cause the complete or partial interruption to Shanghai Stock Connect trading occurs, SEHK Securities Trading Service Company reserves the rights to suspend Shanghai Stock Connect service and make public announcement. After the discontinuation of the abnormality, SEHK Securities Trading Service Company can resume Shanghai Stock Connect service, and will make public announcements accordingly. Article 94 The SSE and SSE Securities Trading Service Company shall not be liable for any loss caused by trading abnormalities or the adoption of responsive measures to treat these abnormalities. 31

32 Chapter V Self-regulation Article 95 The SSE and the SEHK will enhance regulation on Shanghai-Hong Kong Stock Connect trading and relevant information disclosure through cross-border regulatory cooperation. Article 96 Trading abnormality in Shanghai Stock Connect will be the key target of monitoring according to SSE Trading Rules and other relevant rules. Article 97 When SEHK Securities Trading Service Company detects the existence or possible existence of trading abnormality in Shanghai Stock Connect as defined in SSE Trading Rules, it shall notify the SSE in a timely manner, alert SEHK Participants and have SEHK Participants alert their clients, and take measures including refusal to provide Shanghai Stock Connect service for SEHK Participants according to the situation. SEHK Securities Trading Service Company shall take proper measures to require SEHK Participants to inform the clients of the existing or potential trading abnormalities in Shanghai Stock Connect trading as defined in SSE Trading Rules and other relevant rules, and shall reject the client s subsequent Shanghai Stock Connect trading orders when necessary. Article 98 When a breach of the Measures or other relevant rules of the SSE occurs, or violation and possible violation of regulations concerning information disclosure as defined in the SSE Listing 32

33 Rules happens, the SSE can conduct investigations into the suspected breach, and require SEHK Securities Trading Service Company to provide relevant materials; the SSE can also request the SEHK to impose investigative measures on relevant Participants. Article 99 Where a serious breach of the Measures or other relevant SSE rules occurs in Shanghai Stock Connect Trading, the SSE can request the SEHK to impose relevant regulatory measures or disciplinary sanctions on its Participants, or request the SEHK to ask its Participants to issue verbal or written warnings to the investors concerned, as well as to refuse to accept their Shanghai Stock Connect trading orders. Article 100 When trading abnormality in Shanghai Stock Connect has severely disturbed the SSE market, the SSE can suspend or restrict the trading rights of SEHK Securities Trading Service Company, or refuse to accept trading orders from the investors concerned submitted by SEHK Securities Trading Service Company. After the discontinuation of the trading abnormality, the SSE has the discretion to restore the trading rights of SEHK Securities Trading Service Company or resume acceptance of relevant trading orders. Article 101 When the investors violate information disclosure requirements stipulated in business rules such as SSE Listing Rules in buying and selling Shanghai Stock Connect, the SSE may take regulatory measures or impose disciplinary sanctions on the investors 33

34 concerned according to relevant regulations. Article 102 Hong Kong Stock Connect investors and SSE Members participating in Hong Kong Stock Connect trading shall not violate regulations in the Measures or engage in any market misconduct. Article 103 Upon discovery of existing or potential acts of market misconduct by investors in Hong Kong Stock Connect trading, SSE Members shall alert those investors or refuse to accept the orders from those investors. Members shall also notify the SSE of the relevant situation in a timely manner. Article 104 Upon the request of the SEHK or when the SSE considers necessary, the SSE can conduct both on-site and off-site investigations into market misconduct or other rule-breaching activities in Hong Kong Stock Connect trading, and require the submission of any related materials from relevant SSE Members and their clients. Such materials can also be made available to the SEHK. Article 105 Upon the request of the SEHK, the SSE can take regulatory measures or impose disciplinary sanctions on serious market misconduct from SSE Members or their clients. Article 106 The SSE is entitled, when necessary, to conduct inspections on the risk management, the safe operation of technology systems and the execution of relevant business rules of the SSE by 34

35 SEHK Securities Trading Service Company. Article 107 When SEHK Securities Trading Service Company is in breach of the Measures and other relevant rules of the SSE, the SSE can take regulatory measures or impose disciplinary sanctions including verbal and written warnings, regulatory talks, circulation of notice of criticism and public censure etc,. Article 108 When SSE Members and their clients are in breach of the Measures and other relevant rules of the SSE, the SSE can take regulatory measures or impose disciplinary sanctions including verbal and written warnings, regulatory talks, circulation of notice of criticism and public censure etc,. Article 109 Should Shanghai Stock Connect investors, Hong Kong Stock Connect investors, SEHK Securities Trading Service Company or SSE Members participating in Shanghai-Hong Kong Stock Connect trading engage in severe violations of relevant laws, regulations, rules, normative documents or business rules, the SSE may report to the CSRC for investigation and enforcement. Article 110 The SSE reserves the rights to fully or partially suspend Shanghai-Hong Kong Stock Connect trading in accordance with relevant laws, regulations, rules, normative documents and business rules, or by request of the regulatory authorities. 35

36 Article 111 The SSE shall assume no liability for any loss induced by the drafting or revision of business rules or by performing self-regulation management responsibility according to the business rules. SSE Members and Hong Kong Stock Connect investors shall be aware of and acknowledge regulations regarding liability exemption stipulated in SEHK business rules. Chapter VI Supplementary Provisions Article 112 Definitions of the following terms: 1. Shanghai-Hong Kong Stock Connect : A mutual market access mechanism between Shanghai and Hong Kong stock markets which enables investors in Mainland and Hong Kong to trade shares listed on the other Exchange s market within certain scope via SSE Members or SEHK Participants through SSE Securities Trading Service Company or SEHK Securities Trading Service Company established in Hong Kong and Mainland China, respectively. The Shanghai-Hong Kong Stock Connect includes Shanghai Stock Connect and Hong Kong Stock Connect. 2. Shanghai Stock Connect: Investors trade eligible SSE-listed shares through entrusting SEHK Participants to send orders to the SSE via SEHK Securities Trading Service Company. 3. Hong Kong Stock Connect: Investors trade eligible SEHK-listed shares through entrusting SSE Members to send orders to the SEHK via SSE Securities Trading Service Company. 4. Shanghai Stock Connect Stocks: The SSE-listed stocks within 36

37 prescribed scope that can be traded by investors through Shanghai Stock Connect. 5. Hong Kong Stock Connect Stocks: The SEHK-listed stocks within prescribed scope that can be traded by investors through Hong Kong Stock Connect. 6. Shanghai Stock Connect Investors: Investors who trade Shanghai Stock Connect stocks via SEHK Participants or directly through Shanghai Stock Connect. 7. Hong Kong Stock Connect Investors: Investors who trade Hong Kong Stock Connect stocks via SSE Members or directly through Hong Kong Stock Connect. 8. Trading day: The trading day of the SSE. 9. Trading day under Shanghai Stock Connect: Trading day for Shanghai Stock Connect Stock as announced by SEHK Securities Trading Service Company. 10. Trading day under Hong Kong Stock Connect: Trading day for Hong Kong Stock as announced by SSE Securities Trading Service Company. 11. SSE Members: The securities companies that have attained regular SSE membership. 12. SEHK Participants: The exchange participants (EPs) as defined in the SEHK Rules of Exchange. 13. A share: SSE-listed RMB common stocks. 14. H share: Shares of companies registered in Mainland China that are traded on the SEHK. 15. A+H companies: Companies registered in Mainland China with shares traded on both the SSE and the SEHK. 37

38 16. Pre-delisting stocks: Stocks that have been decided to be terminated from listing by the SSE but not yet been delisted. 17. At-auction limit order: An order that can be executed at a specified or better price as reflected in the SEHK Rules of Exchange which can be submitted during the pre-opening session. 18. Enhanced limit order: An order that can be executed at a specified or better price as reflected in the SEHK Rules of Exchange which can be submitted during the continuous trading session. 19. Odd lots: Securities that are less than one normal unit of trading in amount. 20. Price stabilization period: Price stabilization period for certain stock as stipulated in its prospectus. 21. Shanghai Stock Connect Stock margin trading: The purchase of Shanghai Stock Connect Stock by investors through securities margin financing in Hong Kong stock market. 22. Shanghai Stock Connect Stock covered short selling: The selling of Shanghai Stock Connect Stock via Shanghai Stock Connect after the borrowing of Shanghai Stock Connect Stock through stock borrowing and lending in Hong Kong stock market. 23. Shanghai Stock Connect Stock borrowing and lending: The lending of Shanghai Stock Connect Stocks by EPs to their clients or other EPs, or the lending of Shanghai Stock Connect Stock by eligible institutions to EPs in Hong Kong stock market. 24. Shanghai Stock Connect Stock covered short selling ratio: The proportion of covered short selling volume of a single Shanghai Stock Connect Stock within one trading day under Shanghai Stock Connect in the total shares of the same stock held by HKSCC as a 38