Source: http://www.hkex.com.hk/eng/market/sec_tradinfra/TSF/FAQTSF.htm
Timestamp: 2017-10-21 02:52:59
Document Index: 120756334

Matched Legal Cases: ['art 1', 'art 2', 'art 3', 'art 4', 'art 5', 'art 1', 'art 2', 'art 3', 'art 4', 'art 5', 'art 3', 'art 7']

Hong Kong Exchanges and Clearing Limited > Home > Market Operations > Securities Trading Infrastructure > RMB Equity Trading Support Facility (TSF) > Frequently Asked Questions
Part 1: TSF in general
Part 2: Register as TSF Eligible Participants
Part 3: Foreign Exchange ( FX ) conversion under the TSF
Part 4: Trading
Part 5: Clearing, Settlement and Ear-marking of TSF shares
Part 1. TSF in general
In addition to other channels (such as licensed banks and brokers) where Renminbi (RMB) can be exchanged or sourced, the RMB Equity Trading Support Facility, or Trading Support Facility (TSF), is designed to serve as a back-up facility to enable investors who wish to buy RMB-traded shares (“RMB shares”) in the secondary market in Hong Kong Dollar (HKD) if they do not have sufficient RMB or have difficulty in obtaining RMB from other channels. Please click here to see an overview of the TSF model.
Is the TSF ready to support the trading of RMB shares?
The TSF was launched on 24 October 2011 to support the trading of RMB shares in the secondary market. The TSF is operated by Hong Kong Securities Clearing Company Limited (“HKSCC”), a subsidiary of Hong Kong Exchanges and Clearing Limited (“HKEx”).
Is the use of the TSF mandatory?
No. The use of the TSF is optional for Exchange Participants (“EPs”) and all market participants. EPs are free to offer other arrangements or channels to make RMB available to their customers so long as the services or arrangements offered are in compliance with Hong Kong law and the applicable regulatory requirements.
Will the TSF support initial public offering?
HKEx has been working closely with Hong Kong regulators and market participants in developing different arrangements to facilitate the initial public offering of RMB products. Please click here for more details on the RMB Equity Issuance Models.
What will be the fund size of the TSF?
The fund size of the TSF will be determined by taking into account a number of factors including the amount of RMB available in Hong Kong (i.e. CNH). The funds available to the TSF will be maintained at an appropriate level in view of the total RMB deposit base in Hong Kong. HKEx expects the initial size of the TSF to be modest and relative to the size of the RMB share offerings to be made to the Hong Kong market. It is also expected that over time, the fund size of the TSF will be adjusted to reflect the market demand for RMB listed products, the underlying usage of the TSF and the overall RMB deposit base in Hong Kong. The TSF will be operated and maintained to help support and sustain the development of the RMB equity market in Hong Kong and for such period as is needed to achieve this purpose.
Will the TSF or EPs using the TSF be subject to the RMB 20,000 daily exchange limit?
The RMB 20,000 daily exchange limit is a requirement of a clearing agreement (the “Clearing Agreement”) that banks have entered into with the Bank of China (Hong Kong), the clearing bank for RMB in Hong Kong.
The daily exchange limit is not applicable to the TSF or to EPs using the foreign exchange (“FX”) Services of the TSF (the “FX Services”). The FX transactions to be handled by the TSF will be transactions entered into between HKSCC, as the operator of the TSF, and EPs who wish to utilize the TSF. HKSCC is not a party to the Clearing Agreement and as far as HKSCC is aware, no EP is a party to the Clearing Agreement.
Will the TSF support all RMB stocks traded on the SEHK including authorized unit trusts and derivative warrants?
The TSF supports trading of RMB-traded shares in the secondary market initially. Starting from 6 August 2012, the TSF will also support the trading of RMB-traded equities-related Exchange Traded Fund and Real Estate Investment Trust. Therefore, ChinaAMC CSI 300 Index ETF (stock code: 83188) and Hui Xian REIT (stock code: 87001) will be included as TSF stocks.
Other types of securities, such as non-equity related exchange traded funds (e.g. Hang Seng RMB Gold ETF – stock code: 83168), derivative warrants and callable bull/bear contracts (CBBCs) will not be supported at this stage. This is to ensure the best use of the RMB funds available to the TSF. HKSCC, as the TSF operator, may review this policy from time to time as appropriate. A list of securities to be supported by the TSF ("List of TSF Stocks") will be updated and published on the HKEx website.
Based on the model currently envisaged, an announcement on the potential suspension of the TSF will be made to alert the market (through the existing channels including AMS, CCASS Terminal and the HKEx website) when the FX facility available to the TSF drops to a particular prescribed level. In such circumstance, Participants should assess their risk exposure, consider whether to amend or cancel their outstanding TSF FX orders which have been input into the trading system and consider taking steps to suspend clients’ orders for the FX Services (e.g. by blocking incoming TSF Buy Orders via online trading platform).
Part 2. Registration as TSF Participants
There is no mandatory requirement to use the FX Services. However, Participants who wish to utilize the TSF are required to comply with the registration criteria of SEHK and/or HKSCC (as the case may be) (The registration criteria is set out in Section IV of TSF Participant Registration Form). These are summarized below.
A participant who has complied with the relevant criteria set out above is referred to as a “TSF Participant”; and "List of TSF Participants" will be published on the HKEx website.
Part 3. Foreign Exchange ( FX ) Services under the TSF
How will the RMB FX Rates be determined?
The TSF will source or exchange RMB and HKD from one or more Hong Kong licensed banks which HKSCC has established arrangements with (the “TSF Partner Banks”) after taking into account, among others, the demand of both currencies from TSF Participants on a daily basis. The FX transactions between HKSCC and the TSF Partner Banks serve as back-to-back transactions to support the execution of FX transactions between TSF Participants and HKSCC, as the operator of the TSF. The exchange rates to be used by the TSF will be set by reference to the rates provided by the TSF Partner Banks on a commercial basis.
Will TSF Participants be subject to any FX order size limit when using the services of the TSF?
It is not currently envisaged that an FX order size limit will be imposed by the TSF. However, availability of the FX Services is subject to the availability of RMB and HKD in the Hong Kong market.
Yes. The TSF will publish the RMB FX Rates through other existing channels including AMS and CCASS Terminals. Investors may check the rates through their brokers and/or custodians. When the HKEx website is back to service, the investors may verify previously published rates through the website as historical RMB FX Rates will be displayed on the HKEx website for a period of not less than 30 calendar days.
Part 4. Trading
Is there any input requirement when an EP wishes to input an order to buy or sell shares in AMS/3 and use the FX Services for money settlement of the share transaction?
Where an EP (who is a TSF Participant) wishes to use the FX Services in support of a share transaction on the AMS/3, the EP will effectively be entering into two separate transactions: (i) the transaction to buy or sell the relevant shares; and (ii) the FX transaction to buy or sell RMB (depending on whether the share transaction is a buy or a sell transaction). To indicate the use of the TSF service, an EP is required to input any order to buy or sell shares into AMS/3 in the following manner:
Will AMS/3 automatically reject orders marked with “TSF” that were input by an EP who is not registered as a TSF Participant or other invalid TSF orders?
No. AMS/3 will not automatically reject orders with “TSF” marked in the Reference field or BSS Broker Comment field which has been input by an EP who is not a TSF Participant or other invalid TSF orders (described in question 4.1). However, invalid TSF orders, if matched, will not be treated as TSF supported trades and will accordingly have to be settled by the relevant EPs in RMB, not HKD. No FX Service will be provided for the above trades by the TSF.
Before the TSF order is automatched on the AMS/3, an EP (who is a TSF Participant) may remove the “TSF” indicator from the order and the order will not be treated as a TSF order. Once the TSF order is matched, the request for the FX service is irrevocable.
As described in question 4.1, TSF Buy Orders must be input in the form of an At Auction Order (AAO) or a Special Limit Order (SLO). Any outstanding AAO or SLO after matching will be cancelled automatically and will not be stored in AMS/3. This feature will ensure that buy orders specified for using the TSF FX Services will be settled with certainty via the TSF and investors can be assured of execution certainty.
Investors who intend to use the TSF can instruct their brokers who have been registered as TSF Participants to request for the FX Services. With the instructions of the investors, the brokers (as TSF Participants) could then input TSF orders as described in Question 4.1 in AMS/3. Investors, however, may have their own sources of RMB funding and may not need to tap into the TSF. The TSF is meant to be a back-up FX facility. There is no requirement to use the TSF’s FX Services.
Only the trading of “TSF Stocks” and only TSF Participants are eligible for using the TSF. Before placing TSF orders, investors should ensure the RMB shares that they want to trade is on the “List of TSF Stocks” and their brokers are on the “List of TSF Participants”. Both lists are available on the HKEx website.
Part 5. Clearing, Settlement and Earmarking of TSF shares
While a bid/ask rate will apply to each TSF Exchange Trade (see part 3 question 3.2) and the total value of TSF FX Transactions to be settled by a CCASS Participant (which must be a TSF Participant) is to be calculated on a gross basis, the money settlement amount applicable to a CCASS Participant will be paid on a net basis on each Business Day that HKSCC is open for business. The settlement cycle will follow the standard settlement cycle for equity securities listed and traded on SEHK, with RMB and HKD payments effected through existing CCASS settlement payment methods including RTGS and CCASS money settlement instructions.
Will any new CCASS function be introduced to help Participants manage or track TSF FX Transactions and ear-marked shares?
Yes. Additional CCASS reports will be provided including reports on confirmation of TSF Final FX Rates, money obligations for settlement of TSF Exchange Trades and details of TSF FX Transactions and Stock Release Requests made or input by CCASS Participants who are TSF Participants.
Generally speaking, brokers will need to either arrange for RMB conversion in the FX market to complete the settlement with HKSCC and/or its clients; or to use the Stock Release Request to release earmarked shares from the TSF to rectify the erroneous input. For a detailed analysis of the handling for each exception case, please refer to Part 7: Exception Management of “TSF Information Paper” available at:
http://www.hkex.com.hk/eng/market/sec_tradinfra/TSF/Documents/TSF_Info_Paper.pdf
Participants can enquire such frozen SI Positions via ‘Enquire Due / Overdue Position’ function, where ‘FROZEN’ will be displayed next to the POSITION TYPE. If required, Participants should re-input the SI for matching and settlement with its counterparty. FROZEN SI Positions will be purged after 10 calendar days.