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China regulators release draft rules on planned 'Bond Connect'
June 12, 2017 / 10:59 AM / 6 months ago

China regulators release draft rules on planned 'Bond Connect'

SHANGHAI, June 12 (Reuters) - Chinese regulators on Monday published draft rules and solicited public feedback for a long-awaited “Bond Connect” programme intended to link China’s huge domestic bond market with overseas investors.

Under the draft rules published on the website of the China Foreign Exchange Trade System (CFETS), foreign investors targeting China’s bond market under the connection would be required to submit quotation requests of a minimum 1 million yuan ($147,100).

CFETS said it would have the right to investigate investors whose trading or information disclosure violate its rules or the rules of China’s interbank bond market.

“Abnormal” trading activities by investors, including insider trading, market manipulation and frequently sending quotations not reflecting “true trading intentions” could result in investors’ trading rights being suspended or revoked, the draft rules said.

China’s bond market was worth 66.9 trillion yuan, or about $9.8 trillion, at the end of April, according to the People’s Bank of China (PBOC).

The “Bond Connect” programme has been planned in the wake of a scheme launched in 2014 that allows two-way trading between the Hong Kong and Shanghai stock markets. Bankers say it would be a milestone in the opening of China’s capital markets.

The draft rules only concern “Northbound” trade, or the trading of Chinese bonds by foreign and Hong Kong investors.

In May, the Hong Kong Monetary Authority, the city’s bond market regulator, and the PBOC announced that the programme had been formally approved, but that it would only feature “Northbound” trade in its initial stage.

Regulators have not yet provided a timetable for when the “Bond Connect” would begin operation. ($1 = 6.7983 Chinese yuan) (Reporting by Andrew Galbraith; Editing by Richard Borsuk)

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