Shanghai and London stock exchanges take a step closer to setting up trading link
The two bourses complete a feasibility study on a connect scheme in sign of progress two years on from the first talks on the idea
The stock exchanges of Shanghai and London have completed a feasibility study on a trading link, in a sign that the idea, first proposed two years ago but which has not seen much progress, may be back on the official agenda.
In a statement on Sunday, the Shanghai Stock Exchange said that the study has been submitted to the authorities in China and Britain for review. It was the first time that the Shanghai exchange had made public remarks about the plan since Britain’s decision to leave the European Union in mid 2016.
A joint task force set up by the two exchanges “has overcome obstacles including differences in languages, time zones, trading mechanisms and legal systems before completing a feasibility study report”, the statement said.
It added that a depositary receipt system would be adopted to facilitate cross-border trading on the two exchanges, because of the low risks and ease of implementation. Under a depository receipt system, part of a company’s shares are transferred to a custodian bank, which sells them on an exchange abroad.
The Shanghai exchange is already linked to the Hong Kong bourse under the Shanghai-Hong Kong Stock Connect scheme, launched three years ago as part of China’s efforts to open up its markets. The scheme allow international investors to trade A shares listed in Shanghai via any brokers licensed by bourse operator Hong Kong Exchanges and Clearing, while providing mainland Chinese with a means to trade Hong Kong-listed stocks.