Quota

Is there a quota for Shanghai and Shenzhen Connect?

Trading under Shanghai and Shenzhen Connect will be subject to a Daily Quota. There is no Aggregate Quota for Shanghai and Shenzhen Connect as the Aggregate Quota for Shanghai Connect was abolished since 16 August 2016 and none will be introduced for Shenzhen Connect.

The Daily Quota is applied on a "net buy" basis. Based on that principle, investors are always allowed to sell their cross-boundary securities regardless of the quota balance.

How does the Daily Quota work?

The Daily Quota limits the maximum net buy value of cross-boundary trades under each of Shanghai and Shenzhen Connect each day. The Northbound Daily Quota is set at RMB 52 billion for each of Shanghai Connect and Shenzhen Connect, and the Southbound Daily Quota is set at RMB 42 billion for each of Shanghai Connect and Shenzhen Connect.

Daily Quota Balance = Daily Quota – Buy Orders + Sell Trades + Adjustments

The Daily Quota will be reset every day. Unused Daily Quota will NOT be carried over to next day's Daily Quota.

If the Northbound Daily Quota Balance drops to zero or the Daily Quota is exceeded during the opening call auction session, new buy orders will be rejected. However, as order cancellation is common during opening call auction, the Northbound Daily Quota Balance may resume to a positive level before the end of the opening call auction. When that happens, SEHK will again accept Northbound buy orders.

Once the Northbound Daily Quota Balance drops to zero or the Daily Quota is exceeded during a continuous auction session, no further buy orders will be accepted for the remainder of the day. The same arrangement will be applied to the closing call auction of SZSE. It should be noted that buy orders already accepted will not be affected by the Daily Quota being used up and will remain on the order book of SSE and SZSE respectively unless otherwise cancelled by relevant SEHK Participants.

Are there any measures in place to prevent quota hogging?

To prevent mischievous behavior towards the use of the Northbound quota, SEHK has put in place a dynamic price checking for buy orders.

Buy orders with input prices lower than the current best bid (or last traded price in the absence of current best bid, or previous closing price in the absence of both current best bid and last traded price) beyond a prescribed percentage will be rejected by CSC. During opening call auction, the current bid (or previous closing price in the absence of the current bid) will be used for checking. During closing call auction of SZSE, the current bid (or last traded price in the absence of the current bid) will be used for checking. Dynamic price checking will be applied throughout the trading day, from the 5-minute input period before the start of opening call auction until market close of SSE/SZSE. SEHK has set the dynamic price checking at 3% during the initial phase. The percentage may be adjusted from time to time subject to market conditions.

Can we place buy orders at a lower price first when trading commences and then amend the price of the orders afterwards in order to secure the availability of quota for Northbound trading?

Anyone who wish to amend their Northbound orders must cancel the original orders first and then input new orders. The quota released at the time of order cancellation may immediately be taken up by orders input by others. Hence, quota cannot be "reserved" by using this method. Do not place buy orders with fictitious prices in order to secure or reserve the quota.

Limitations & Important Notes

Under what circumstances will the purchase of SSE and SZSE securities via Shanghai and Shenzhen Connect be suspended (while selling is allowed)?

Investors will only be allowed to sell but restricted from buying SSE Securities via Shanghai Connect if:

1. such securities subsequently cease to be a constituent stock of the relevant indices; and/or
2. they are subsequently placed under risk alert; and/or
3. the corresponding H shares of such securities are subsequently delisted from SEHK, as the case may be; and/or
4. daily quota is used up or the buy order exceeds the remaining daily quota

Investors will only be allowed to sell but restricted from buying SZSE Securities via Shenzhen Connect if:

1. such securities subsequently cease to be a constituent stock of the relevant indices; and/or
2. such securities are, based on any subsequent periodic review, determined to have a market capitalisation of less than RMB 6 billion; and/or
3. they are subsequently placed under risk alert; and/or
4. the corresponding H shares of such securities are subsequently delisted from SEHK, as the case may be; and/or
5. daily quota is used up or the buy order exceeds the remaining daily quota

Can Hong Kong and overseas investors participate in the initial public offering (IPO) of SSE and SZSE A shares through Shanghai Connect and Shenzhen Connect?

Shanghai Connect and Shenzhen Connect only encompass secondary market trading. Primary market activities, such as initial public offering (IPO) are not supported.

Are there any disclosure obligations for SSE and SZSE Securities?

According to the Law of the PRC on Securities, when an investor holds or controls up to 5% of the issued shares of a Mainland listed company, the investor is required to report in writing to the CSRC and the relevant exchange, and inform the listed company within three working days. The investor is not allowed to continue purchasing or selling shares in that listed company during the three days.

For such investor, every time when a change in his shareholding reaches 5%, he is required to make disclosure (in the same manner as mentioned above) within three working days. From the day the disclosure obligation arises to two working days after the disclosure is made, the investor may not buy or sell the shares in the relevant Mainland listed company.

If a change in shareholding of the investor is less than 5% but results in the shares held or controlled by him falling below 5% of the relevant Mainland listed company, the investor is required to disclose the information within three working days.

How are SSE and SZSE Securities under Shanghai and Shenzhen Connect held for Hong Kong and overseas investors? Can investors hold SSE and SZSE Securities acquired through Shanghai and Shenzhen Connect in physical form?

Since SSE and SZSE Securities are issued in scripless form, physical deposits and withdrawals of SSE and SZSE Securities into/from the CCASS Depository are not available.

As explained above, Hong Kong and overseas investors can only hold SSE and SZSE Securities through their brokers/custodians. Their ownership of such is reflected in their brokers/custodians' own records such as client statements.

How do I participate in corporate actions of SSE and SZSE Securities companies?

BOOM will keep our clients informed of the corporate actions of SSE and SZSE Securities companies if they are required to take actions. Clients should note that the time to take actions for some types of corporate actions of SSE and SZSE Securities companies may be as short as one business day only.