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SCMP Reporter

Luxembourg-based clearing house Cedel Bank has submitted a report to the China Securities Regulatory Commission (CSRC) detailing issues relating to the establishment of a centralised securities depository and settlement system for yuan-denominated paper.

  In March last year, the Ministry of Finance appointed the bank project manager to set up the system, tentatively named Chinaclear.

  Cedel's executive vice-president, Thomas Connaghan, said the most crucial step towards the establishment of the system would be whether China wished to fully open its securities market to foreign investors.

  'This will be a legal rather than a technical issue,' he said.

  The report makes recommendations on the legal framework necessary to guide participants to access the market.

  It details the technological software required and the communication interface needed to ensure the most accurate and efficient processing of transaction information.

  Mr Connaghan said Cedel had advised the CSRC from the outset to create an environment which complied with the common footing of the Group of 30 countries.

  'The G30 footing represents the most basic requirement a market must have in place in order to win confidence from international investors,' he said.

  Cedel's regional manager for Asia-Pacific, Philippe Metoudi, said the next task would be to choose the technical software and communication interface under which the nationwide settlement system was to operate.

  At this stage, Chinaclear's progress of development is still controlled by mainland authorities, with Cedel only assuming an advisory role in the process.

  Mr Metoudi said whether the yuan was freely convertible was not the most crucial factor affecting the settlement system's development.

  He said Cedel also provided securities clearing services for bonds issued in South Africa, where foreign exchange restrictions were imposed.

  This experience could provide a model for the way Cedel provided services to China before the yuan became freely convertible, he said.

THE REPORT Report on central securities depository details legal and technical needs System depends on whether China fully opens its securities market to foreign investors 



Securities market opening 'key' to Chinaclear system