· Area of Law： Banking & Finance

· Level of Authority： Industry Regulations

· Date issued：05-19-2017

· Effective Date：05-19-2017

· Status： Effective

· Issuing Authority： Shanghai Clearing House

Joint Announcement of the Shanghai Clearing House and the Central Moneymarkets Unit of the Hong Kong Monetary Authority on Providing Custody and Settlement Services for the Bond

Pursuant to the Joint Announcement of the People's Bank of China and the Hong Kong Monetary Authority, this Announcement is jointly promulgated by the Shanghai Clearing House and the Central Moneymarkets Unit ("CMU") under the Hong Kong Monetary Authority ("HKMA") on the institutional arrangements for interconnection of custody and settlement services under the "Bond Connect Program":
1. The Shanghai Clearing House is a bond market infrastructure approved by the People's Bank of China that provides custody and settlement services. The CMU is a bond market infrastructure directly operated by the HKMA. The Shanghai Clearing House and the CMU shall support transactions under the "Bond Connect Program" through the establishment of infrastructure connection.
2. Institutional arrangements for interconnection of custody and settlement services between the Shanghai Clearing House and the CMU shall be limited to the "Northbound Trading Link" in the initial stage, i.e., where foreign investors invest in the Mainland interbank bond market through the institutional arrangements for interconnection of custody and settlement services between the CMU and the Shanghai Clearing House. Relevant arrangements for the "Southbound Trading Link" shall be separately announced subject to the decisions by regulatory authorities in the Mainland and Hong Kong.
3. Foreign investors who invest in the Mainland interbank bond market via the "Bond Connect Program" shall be placed under the multi-level custody model. The Shanghai Clearing House shall be the general depository and custody institution, while the CMU shall be the secondary custody institution. The Shanghai Clearing House has signed a legal agreement with the HKMA to clarify the rights and obligations of the general depository and custody institution and the secondary custody institution.
4. Where foreign investors invest in the Mainland interbank bond market via the "Bond Connect Program", both the scope of investors and the scope of trading tools shall remain the same as those applicable where foreign investors directly invest in the Mainland interbank bond market. All products under the depository and custody of the Shanghai Clearing House may be invested under the "Bond Connect Program".
5. The Shanghai Clearing House shall provide full-amount clearing and transaction-by-transaction settlement services for the transactions executed by foreign investors in investing in the Mainland interbank bond market via the "Bond Connect Program".
6. Pursuant to the requirements of regulatory authorities in the Mainland and Hong Kong, the Shanghai Clearing House, the CMU and foreign investors who invest in the Mainland interbank bond market via the "Bond Connect Program" shall all fulfill information reporting obligations.
7. The Shanghai Clearing House and the CMU shall respectively draft relevant business rules to specify the requirements on custody and settlement services for foreign investors participating in the "Bond Connect Program", and implement such rules after reporting the same to the regulatory authorities in the Mainland and Hong Kong for approval.
This Announcement is hereby given.