The highly anticipated Shanghai-Hong Kong Stock Connect programme (“Stock Connect”) was officially launched on 17 November 2014, marking an unprecedented milestone in the establishment of mutual market access between Hong Kong and Mainland China.

The new cross-border investment channel will enable investors in Hong Kong and the Mainland to trade designated securities listed in each other’s market, through their respective local brokers for the first time.

While there has been an impressive range of materials published to date to inform and educate investors, market participants and issuers on Stock Connect, there are still some critical areas that have not been clearly articulated. This note will be the first in a series of articles in which we propose to examine some of the issues that may potentially present challenges for various stakeholders as the programme unfolds. Over the forthcoming months we will be focusing on some of the following issues which we consider should generate the greatest interest for all parties intending to participate in Stock Connect:

  • Custodian arrangements and enforcement rights

    How Hong Kong and overseas investors enforce shareholders’ rights through HKSCC as nominee holder in connection with SSE Securities? Would the Mainland courts recognise the beneficial ownership of investors?


  • Margin trading and taking security over SSE Securities

    Would margin financing activities permitted under Hong Kong law be prohibited in respect of SSE Securities? In what circumstances would taking security over SSE Securities for margin financing (or for any other reason) involve an “off-exchange” or non-trade transfer?


  • Foreign ownership, disclosure of interests and short-swing rule

    What are the practical implications which securities brokers and investors should be aware of with respect to Mainland foreign ownership rules, disclosure requirements and the short-swing trading restriction?


  • Insider dealing and market misconduct

    What are the issues that Hong Kong and overseas investors should be aware of with respect to Mainland insider dealing and market misconduct rules when trading in SSE Securities


  • Cross-border enforcement

    How would cross border enforcement issues and regulatory cooperation between SFC and CSRC work in practice, in respect of market misconduct in either or both of the markets for activities conducted through Stock Connect?


This paper presents a broad overview of the key features of Stock Connect as well as consolidates a number of important developments that have occurred since the official launch date was approved on 10 November 2014 by the Securities and Futures Commission (SFC) and the China Securities Regulatory Commission (CSRC).

The new market opportunities presented by Stock Connect are significant and mark an important step in RMB internationalisation. The programme is expected to broaden the domestic and institutional investor base in Hong Kong and the Mainland, and is bound to bring considerable benefits to the capital markets. Notwithstanding, Stock Connect also presents a number of new legal and operating challenges which may not become apparent until the later phases of the programme.


Elsa Chan is a partner in the Capital Markets Practice Group of the Firm's Hong Kong and China offices. Her practice focuses on corporate restructuring, mergers and acquisitions, initial public offerings by Hong Kong and PRC companies and other capital markets transactions. She also provides advice on joint venture establishment and other corporate matters.

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