HKEX unveils details of investor identification model for Northbound trading

Maria Nikolova

HKEX will launch the secure file transfer protocol service for exchange participants on August 27, 2018.

Hong Kong Exchanges and Clearing Limited (HKEX) today unveiled the launch details of the investor identification model for Northbound trading (NB Investor ID Model) through its mutual stock market access program with the exchanges in Shanghai and Shenzhen (Stock Connect). The HKEX announcement comes after market regulators said the model will be launched on September 17, 2018.

Under the NB Investor ID Model, Exchange Participants (EPs) that offer Northbound trading services are required to assign a unique number in a standard format, known as the Broker-to-Client Assigned Number (BCAN), to each of their Northbound trading clients. They also have to provide Client Identification Data (CID) to HKEX, which will forward the information to Mainland exchanges. BCANs and CID – the two main components of the NB Investor Model – are for regulators’ market surveillance only, HKEX notes.

To secure a smooth rollout of the NB Investor ID Model, HKEX will commence the secure file transfer protocol service for exchange participants on August 27, 2018. That is supposed to give Eps sufficient time to register BCANs and CIDs of their NB trading clients before the launch date of NB Investor ID Model.

HKEX has been working closely with market participants in the past year through various briefing sessions, seminars and discussion forums to explain the NB Investor ID Model. HKEX has also arranged several rounds of testing sessions and market rehearsals to help EPs to prepare themselves both technically and operationally to meet the new regulatory requirements.

Under the current Stock Connect arrangement between Hong Kong and the Mainland exchanges, regulators enquire EPs about an investor’s identity when necessary. Implementation of the NB Investor ID Model is anticipated to lead to more efficient Hong Kong-Mainland cross-border market surveillance.

As announced by the Hong Kong Securities and Futures Commission (SFC) and China Securities Regulatory Commission (CSRC) in November 2017, the SFC and the CSRC agreed, on a reciprocal basis, to introduce a similar investor identification regime for southbound trading to assist one another in performing their regulatory functions under Stock Connect. The investor identification regime for southbound trading will be implemented as soon as practicable.

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