The ViewShanghai-Hong Kong stock connect a key pillar in China market reform

Forget about "One Country, Two Systems". We have moved onto One Country, Two Jurisdictions.

The haste with which the Shanghai-Hong Kong Stock Connect scheme was announced, less than five trading days before kick off, gives credence to the view that the continuing presence of the revolting students in the pedestrian precinct formerly known as Harcourt Road caused the three-week delay to the original timetable.

But scheme is a lot more important than Hong Kong's little local difficulties. The Xi-Li administration in Beijing may have set out their stall as political conservatives, but at the same time they seem to be economic liberals. Stock Connect is an important pillar in the reform of mainland capital markets.

It is inconceivable that such a reform could have been negotiated quickly, incorporating as it does the agreement of two stock exchanges in very different jurisdictions, many and various compliance regulators, governments at various levels, different taxation authorities, and the bridging of broker trading, settlement and custody processes.

For two very different jurisdictions to comprehensively join hands could also herald broader change in global capital markets. There are several global companies with dual listings, such as HSBC in London and Hong Kong, and Royal Dutch Shell in London and Amsterdam, but 500-odd stocks being traded in such a manner could signify the beginning of the end for the traditional national stock exchange.

It has long been my view that we are progressing towards a world in which a few global exchanges trade shares of global titan firms around the clock. National stock exchanges will be left to trade smaller national stocks. The Shanghai-Hong Kong Stock Connect may well lead the way.