Most Read Contributor in Hong Kong, September 2016
Originally published 12 May 2011
Keywords: RMB Equity Trading Support Facility,
TSF, RMB-denominated shares
Hong Kong Exchanges and Clearing Limited (HKEx) intends to
launch the new RMB Equity Trading Support Facility (TSF) as early
as in the second half of 2011. Broadly speaking, TSF allows
investors to exchange Hong Kong dollars (HKD) for Renminbi (RMB) in
order to purchase RMB-denominated shares in the secondary market.
Upon the selling of the RMB-denominated shares, investors can get
their money back in HKD. The major purpose of launching the TSF is
to ensure sufficient and reliable RMB liquidity in Hong Kong so as
to facilitate the growth of the RMB-denominated share market which
is important for the further development of the offshore RMB market
in Hong Kong.
Operation of the TSF
The TSF will manage the RMB/HKD fund flow on a back-to-back
basis between its partner banks and participating brokers. In this
connection, RMB will be sourced by the TSF from one or more banks
in Hong Kong and the TSF will provide RMB through its participating
brokers to investors who wish to buy RMB-denominated shares in the
secondary market. RMB obtained from the TSF will be used to settle
transactions in RMB-denominated shares through Hong Kong Securities
Clearing Company Limited – the operator of the Central
Clearing and Settlement System (CCASS). The exchange rate used by
the TSF will be determined on a commercial basis by the TSF partner
The users of the TSF will pay HKD for RMB. Upon the selling of
the RMB-denominated shares they bought with RMB from the TSF, they
are required to "return" the RMB to the TSF for the
equivalent amount of HKD. This so-called Hong Kong Dollar In, Hong
Kong Dollar Out (or "HKD In, HKD Out") mechanism, which
all procedures will be conducted within CCASS, will ensure that the
TSF is sustainable without access to an unlimited supply of
Major Features of the TSF
In summary, the major features of the TSF are described as
It will be a back-up facility.
RMB available through the TSF will be recyclable.
It will be open and optional to all investors, brokers and
Stock Exchange Participants.
RMB from the TSF will be a committed source of funding and
priced at commercial rate.
According to the HKEx, it is intended that the preparation work
for the TSF will be completed by September this year. However, no
launching date of the product is announced so far. In this regard,
we will issue further update(s) on the new development of the TSF
as and when appropriate
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This article provides information and comments on legal
issues and developments of interest. The foregoing is not a
comprehensive treatment of the subject matter covered and is not
intended to provide legal advice. Readers should seek specific
legal advice before taking any action with respect to the matters
discussed herein. Please also read the JSM legal publications
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