An investor identity system covering the northbound stock trading link between Hong Kong and China is expected to start in the middle of next year, Hong Kong Securities and Futures Commission (SFC) chief executive officer Ashley Alder said.
While the mechanism is designed to cover those buying and selling mainland-listed equities through the connect, Alder said in a speech at the Thomson Reuters Pan-Asian Regulatory Summit yesterday that he hoped Chinese authorities would also share information on southbound investors.
While the two markets are integrating more closely through the series of trading links, their regulatory frameworks are very different.
The SFC, traditionally a lighter-touch regulator, only has real-time information about which brokers have executed a trade — unlike China, where authorities can see which individuals have put in the orders.
The Hong Kong Investment Funds Association has called for a system that would identify the investment company, but not the individual fund or person.
“We have been speaking to the fund industry,” Alder said to reporters after his speech. “By and large, for most trades, it will be at an asset manager level — if it was for every single fund it would be extremely difficult to implement.”
Both markets are concerned about cross-border risk migration, Alder said in his speech.
Chinese authorities are unlikely to expand the number of trading connections unless the risks can be contained, he said.
Hong Kong’s market has three links with China — two stock systems with exchanges in Shanghai and Shenzhen and one for bonds, which started in July.
Despite concerns among investors about increased regulatory oversight of trading in Hong Kong, Alder said that he sees a worldwide move by authorities for better client identification systems. In particular he noted the incoming Markets in Financial Instruments Directive II rules in Europe, and efforts underway in the US.
“It is part of a global trend for better oversight and surveillance,” he said. “As regulators we ultimately would love to have the best insight into trading in our markets we can achieve.”
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