Launched on July 4, ETF connect is a new trading system to bring together ETFs traded on Hong Kong and mainland China exchanges. The platform will be integrated into an already existing Stock Connect infrastructure.
It was developed as a crucial milestone and a tool to expand the existing stock trading system. Experts believe it is going to encourage the growth of Hong Kong as a new ETF hub. It will be used to connect the global capital with the mainland.
The launch of the system will keep all mainland funds open and easy to access by not only Hong Kong but also global individual and institutional traders. The main mission is to help Hong Kong and China mainland markets to develop and promote their capital overseas.
Two main regulators CSRC and SFC have teamed up to work out relevant rules. Together, they have developed a set of regulatory and operational agreements that have been finalized before the launch of ETF connect. What’s more, regulators worked closely to create arrangements that would encourage cross-boundary cooperation.
Those are specific means that deliver not only trading instruments but also educational materials, and other matters that can be of great importance for potential investors. Additionally, specific safety tools were designed to prevent any kind of illegal activities and avoid potential market misconduct.
Later on, a list of initially available ETFs will be officially published by Hong Kong Exchange and Clearing (HKEx). It is expected to have about 83 ETFs available only on the mainland China exchange. What’s more, the list will contain 53 and 30 extra assets listed on Shanghai and Shenzhen exchanges respectively.
Regulators will review and update the list of available ETFs every six months to ensure diversification and eligibility.
HKEX is a publicly-traded organization that has grown into one of the world’s largest international exchange companies. Investors can benefit from a variety of instruments covering commodities, equity, derivatives, assets with a fixed income, and many other types of financial markets such as the London Metals Exchange.
The company is an intermediary or connector between West and East. It was the first one in China to introduce the Connect scheme, which appeared to be the main intermediary between the country and the rest of the world. The original system came up with an advanced ecosystem with a set of diversified products letting traders access a set of liquid and deep global markets.
With the introduction of ETF Connect, HKEX receives a tool to promote and progress its markets as well as seek to connect with overseas institutional and individual traders.