China Issues Draft Rules on Shanghai-London Depository Receipts

CSRC solicits public comments on rules for SSE- and LSE-listed firms issuing depository receipts in each other’s markets through the Shanghai-London Stock Connect, set to launch later this year.

The CSRC (China Securities Regulatory Commission) is seeking public comments on draft rules for the Shanghai-London Stock Connect programme, which is expected to launch later this year.

The programme seeks to allow companies to cross-list depository receipts on the SSE (Shanghai Stock Exchange) and LSE (London Stock Exchange). China has been actively making preparations in a bid to launch the new trading link later this year.

> ALSO READ: London Exchange Releases Shanghai Trading Link Blueprint21 May 2018

The CSRC is soliciting opinions on rules for London-listed firms wishing to issue CDRs (China Depositary Receipts) in China, including specifics on the application documents required, the review and approval procedure, sponsorship, due diligence, accounting and auditing requirements, and issuance caps.

The rules also cover ongoing regulatory requirements including for listing, trading, information disclosures and cross-border conversion. In line with rules on Chinese companies incorporated and listed in Hong Kong (so-called ‘red-chips’), CDR issuers will not subject to compulsory quarterly reporting requirements.

The draft rules also include procedures and standards for Chinese companies issuing GDRs (global depository receipts) for listing on the LSE, defining terms on issuance conditions, price, lock-up periods, as well as the requirements on foreign securities companies and depository banks.

Also specified are the legal responsibilities of all relevant market participants for cases of misconduct.

Separately, the SSE issued a statement saying it will encourage companies listed on its market to also list in London, while also promoting trading in CDRs issued by LSE-listed firms.

The Shanghai-London Stock Connect will help expand China’s capital market by improving market depth and internationalisation, and by promoting cross-border securities business at domestic institutions, the SSE said, adding that it will also provide greater opportunities for investors in both markets.

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