Brokers are hoping the "trading through train" scheme will boost market turnover and strengthen the city's yuan trading, but are concerned about cross-border regulatory issues as well as the cap imposed on the programme.
Louis Tse Ming-kwong, director of VC Brokerage, said the scheme would boost turnover but not to the extent the original, uncapped, 2007 plan would.
Under the current proposal, mainland investors can trade up to 10.5 billion yuan (HK$13.2 billion) a day of Hong Kong stocks and up to 250 billion yuan in total, while Hong Kong investors can trade up to 13 billion yuan a day in Shanghai-listed A shares and up to 300 billion yuan in total. There is no time frame for the total.
"The current scheme has a small daily and total cap. The quota could run out in 23 days if we use up the daily limit. We would like to know if the quota would be replenished immediately," Tse said. He said Hong Kong Exchanges and Clearing "also needs to explain how the 450 Hong Kong brokers will share the daily quota. We definitely don't want a situation in which only big banks or big brokers get the quota. All brokers and investors should be part of it".
Edmond Chan, partner of capital market services group at accounting firm PwC, said the scheme would attract more overseas investors, boost turnover and attract new listings.
"Regulatory issue would be a challenge. For example, if a mainland investor commits insider dealing but trades Hong Kong stocks from Shanghai, the Securities and Futures Commission wouldn't be able to enforce its regulation in the mainland but would have to go through the China Securities Regulatory Commission," Chan said.
Jojo Choy Sze-chung, the Institute of Securities Dealers vice-chairman, said the scheme benefited mainland brokerage firms more than local ones as it allowed mainland brokers to serve mainland investors while Hong Kong brokers can only serve a smaller pool of local investors.
"HKEx and Shanghai Stock Exchange have different trading hours, different trading rules and different clearing rules. These all need to be sorted out. If a mainland broker collapses and fails to settle the trade in Hong Kong, who handles the compensation - HKEx or the Shanghai exchange?" Choy asked.
Hang Seng Bank executive director Andrew Fung Hau-chung said the scheme would increase yuan trading in Hong Kong: "The daily quota under the scheme represents 20 per cent of the daily yuan trading in Hong Kong. We hope China will soon abolish the 20,000 yuan daily exchange cap in Hong Kong to enable investors to freely exchange yuan for investment."