Settlement services - China - China Interbank Bond Market

Procedure for the domestic counterparty

Account opening in CBL

In order for CBL to support clients’ investment into the China Interbank Bond Market (CIBM), Clients are required to open a new sub account in CBL’s books. Clients cannot use their main account in CBL to hold CIBM securities or Onshore CNY.

Investor registration

Foreign investors are not required to obtain approval from any Chinese authorities before investing in the CIBM. However, potential investors of CIBM are to register with PBOC prior to investment. Investors are to take note that investments into B Shares require another application process which differs from the CIBM. Applications to open the bond/cash accounts and trading access in CFETS are to be made with CCDC/SCH and CFETS respectively after the registration process is completed with PBOC.

All CIBM securities are registered in the name of the investor. Currently there are 2 groups of foreign investors allowed into the CIBM:

1. Central Banks, Sovereign Wealth Funds and International Financial Institution
2. Overseas Institutional Investors such as commercial banks, insurance companies, securities companies, fund management companies and other asset management institutions, as well as pension funds, charity funds, donation funds etc that PBOC recognised long term institutional investors.

N.B.: The opening of individual investor accounts by CBL is not permitted.

Before investing in CIBM securities, CBL and HSBC will, at the client’s request, arrange for the following items to be completed sequentially, after the client has sent MT599 and the completed and relevant documents to CBL:

• registration filing confirmation to be obtained from PBOC
• open the Basic RMB account (if needed) and Special RMB account with PBOC
• open the bond account and DVP cash clearing account with CCDC/SCH and application for trading in CFETS
• open the related sub-account in HSBC's books

The registration process and documents required for the 2 groups of foreign investors mentioned above differs therefore CBL clients should refer to the below links for more details on account opening and investment regulations.

For more information, please see Form and document requirement - China - China Interbank Bond Market.

For more information, please see Investment regulation - China - China Interbank Bond Market.

The account opening process will generally take up to three to four weeks after the CBL client has submitted completed and proper documents.

HSBC will open in their books one onshore CNY cash account exclusively for securities investment and one safekeeping account in the name of the investor. CBL will communicate the account details to the CBL client when available. The client’s account in CBL will not be eligible to invest in the CIBM before the relevant cash and safekeeping accounts are opened with HSBC.

The safekeeping account must always be mentioned in the client settlement instructions to CBL so that it can be transmitted to HSBC.

Clients are liable for the usage of any safekeeping accounts obtained through CBL and HSBC. Clearstream Banking shall bear no responsibility due to any illegitimate or erroneous use - for any trading or other purpose - of such safekeeping accounts. CBL does not validate whether the safekeeping accounts that clients use in their settlement instructions sent to CBL represent the legitimate investor who ordered the underlying transaction. Clearstream Banking shall therefore not be responsible if the client uses a safekeeping account belonging to an investor other than the investor on whose behalf the related transaction has been or was deemed to be executed or settled.

Specific settlement rules/settlement restrictions

General

Against payment transactions with domestic counterparties in the CIBM can be executed and settled in CNY only. As trading outside the CIBM is prohibited and due to the investor registration requirements, internal (CBL-CBL) and Bridge (CBL-Euroclear) transfers of CIBM securities are not possible.

Free of payment transactions are allowed for portfolio transfer only. Clients need to send free of payment settlement instruction(s), followed by an MT599 format below:

Attention: Settlement Singapore Team
Client CBL Account Number (CIBM):
Client Securities Account Number and Account Name opened with HSBC:
Client CCDC/SCH Bond Account ID opened via HSBC:
We hereby authorise you to receive/deliver the bonds from/to CCDC/SCH:

1. Bond Name:
   Bond Code:
   Nominal in face value:
2. Bond Name:
   Bond Code:
   Nominal in face value:

Note: For transfer in from PBOC, client needs to inform the Bond Account ID opened with CCDC/SCH and the name of the securities account opened with HSBC to PBOC.

The approval from PBOC will take around two weeks, clients will be informed by CBL to instruct the FOP receipt/Delivery on the settlement date provided by HSBC.

Funding

Clients have to ensure that good funds are received into their CNY accounts at HSBC by 14:00 VD China time for the settlement of receipt against payment trades. Late receipt of funds might result in trade failure.

Firstly, clients need to send a CNY pre-advice (MT210) to CBL from their CBL CIBM account by 11:45 VD China time quoting HSBCCNSH as the cash correspondent bank.

Upon funding, clients can either chose to fund their HSBC cash account through their own cash correspondent bank or via their offshore CNY balance in CBL.

1. For clients funding their CNY cash account at HSBC via their offshore CNY cash correspondent bank, the payment details are as follows:
   
   Beneficiary Name:  Client’s account name
   Beneficiary Account:  Client’s cash account no. opened with HSBC in the format of nnn-nnnnnn-nnn (where n is a digit)
   
   A/C with Institution:
   Name: HSBC Bank (China) Company Limited
   BIC code: HSBCCNSH
   
   Note: Clients need to clarify with their own cash correspondent to clarify the purpose or designated code used for the fund transfer.
   For Overseas Institutional type investors, clients cannot arrange funding from their onshore account as per PBOC requirement.
2. For clients funding their CNY cash account at HSBC via their offshore CNY balance at CBL, please note that this will not be considered a book entry transfer in CBL. CBL is using Bank of China (Hong Kong) as a cash correspondent bank for the cross border transfer. Clients have to send a payment instruction to CBL via CBL main account by 11:45 VD China time stating the payment details strictly in pacs.009 Swift message below:
   
   :IntrmyAgt1/FinInstnId:BKCHHKHHXXX
   :CdtrAgt/FinInstnId:/CN/501290000012
   HSBCCNSH
   :Cdtr/FinInstnld:/< Client’s cash account no. opened with HSBC in the format of nnn-nnnnnn-nnn (where n is a digit) >
   :RmtInf/Ustrd:/BCTFDR/
   
   Note: Clients need to ensure field :IntrmyAgt1/FinInstnId: is not mentioned in the pacs.009 Swift message.

Clients should follow up closely with their own cash correspondent bank or CBL to ensure that the funds are received at their CNY accounts with HSBC by 14:00 VD China time.

For cross border fund transfers, clients should take note of the Hong Kong and China holidays.

Repatriation

Repatriation of onshore CNY is possible and clients should ensure sufficient cash balance in their CIBM cash account before sending their repatriation request. Client should also note that CIBM sale proceeds will not be available for same day repatriation as the fund can be received from CCDC/SCH only after 16:30 China time on value date.

For clients who choose to repatriate funds, they are expected to send a payment instruction to CBL from their CIBM CBL account by 11:45 VD China time for same day repatriation.

1. For clients repatriating their CNY cash account at HSBC to their onshore or offshore CNY cash correspondent bank, client is expected to state the full payment details in their instruction to CBL.
   
   Note: For Overseas Institutional type investors, clients cannot repatriate funds to their onshore account as per PBOC requirement.
2. For clients repatriating their CNY cash account at HSBC to CBL account, please note that this will not be considered a book entry transfer in CBL. Clients have to state the payment details strictly in pacs.009 Swift message below.
   
   :CdtrAgt/FinInstnId:/CN/989584001207
   BKCHHKHH
   :Cdtr/FinInstnld:/01287560120489
   
   In order to sight funds in good value, clients have to send a pre-advice (MT210) to CBL from their CBL main account. The Bank of China Hong Kong must be indicated as the cash correspondent bank in the MT210.
   
   Note: Clients need to observe the pre-advice (MT210) deadline for Bank of China Hong Kong as mentioned in the Cash Matrix.

For cross border fund transfers, client should take note of the Hong Kong and China holidays.

Forex services

CBL does not provide FX services for onshore CNY but only for offshore CNY. The standard FX procedure in CBL shall apply.

Allowed countervalue difference

A maximum difference in countervalue of CNY165 is allowed for the matching and settlement of against payment transactions with domestic counterparties. In the case of a discrepancy within this limit, HSBC will settle with the countervalue instructed by the CBL client.

Out-of-pocket expenses

Out-of-pocket expenses, if and when incurred by the CCDC/SCH/CFETS, will be charged back to the client and will include:

• An account opening fee that is payable each time an account corresponding to a new institutional investor is opened
• Third parties transaction fees

Management of failed instructions

Unconfirmed receipt instructions with domestic counterparties remain pending until they are settled or until they are cancelled. CBL reserves the right to cancel clients' receipt instructions with domestic counterparties that have not been settled by the fifth business day after the requested settlement date and that have not been re-confirmed by the client.

Delivery instructions that have not been settled following their successful provisioning are cancelled and will be re-credited to the client's account (generally on the second business day following their transmission to HSBC).

For the CIBM, the settlement agent will monitor the available holding balances on pre-trade basis to avoid any short selling.

Clients must ensure that settlement instructions for any trades executed are complete and submitted to CBL in good time as late or wrong settlement instructions may result in fail trades. Clients will be required to provide explanation letter to CCDC to explain for any failed trades.

For detailed information, please refer to “Failed Trades and Buy-in Regulations” under Settlement process - China.

New issues settlement

Clients who successfully applied for a new issue should instruct their agent to deliver the securities their accounts. The deadline is 08:00 (CET) on payment date-1. Client is required to send their normal settlement receipt instruction and an email to CBL Client Service Team informing about the new issue and the contacts of the underwriter for follow up.