22 November 2011
Launching of the TSF
The Stock Exchange of Hong Kong Limited ("SEHK") announced the launch of the Renminbi ("RMB") Equity Trading Support Facility ("TSF") on 24 October 2011. This facility is intended to support the trading of RMB stocks on SEHK.
Brief Summary of the TSF
The TSF is operated by the Hong Kong Securities and Clearing Company Limited and as explained in our two previous Legal Updates entitled "The New RMB Equity Trading Support Facility" and "The New RMB Equity Trading Support Facility - Update No. 1" ("Previous Legal Updates"), the major purpose of the TSF is to provide a back-up facility to allow investors who wish to buy shares denominated in RMB in the secondary market with Hong Kong Dollar ("HKD") if they do not have sufficient RMB or have difficulty in obtaining RMB from other sources.
The TSF model adopts the "HKD in and HKD out" principle. Accordingly, only HKD will be (a) accepted for the purchase of RMB-denominated shares (via foreign exchange ("FX") conversion from HKD to RMB) and (b) used to settle sale proceeds for the sale of RMB-denominated shares (via FX conversion from RMB to HKD). The TSF provides FX services through its Exchange Participants to investors who wish to buy RMB stocks in the secondary market. The TSF partner banks will determine the TSF’s RMB/HKD exchange rate on a commercial basis. Subsequently, when investors sell the RMB shares, they are required to return the RMB proceeds to the TSF for the equivalent amount of HKD at the TSF’s exchange rate at the relevant time. These mechanisms aim to ensure that the RMB supplied by the TSF remains in the secondary market and that the offshore RMB market in Hong Kong (or the CNH market) remains intact.
For more details of the TSF, please refer to the Previous Legal Updates.
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