Settlement services - Hong Kong

Pre-matching service

Note: This service is only available for CBL clients.

The table below summarises CBL’s pre-matching service for external settlement instructions, as well as the pre-matching method and start time in the market. For details of Clearstream's pre-matching services, see Pre-matching services for external settlement instructions.

For transactions in CCASS-eligible equities and warrants, when the counterparty is a custodian bank (Clearstream Banking), its safekeeping account with the receiving or delivering agent (Citibank) must be quoted in the settlement instructions.

In addition, the CCASS pre-matching system requires that the account numbers of global custodian accounts at the receiving/delivering agent be correctly formatted (see Account formats for Global Custodians).

N.B.: Clients are strongly urged to comply with global custodian account formats. Clearstream Banking is not in a position to verify these formats and non-compliance will result in unmatched and consequently unsettled trades, which may lead to a buy-in. Any costs, expenses or damages arising from incorrect formatting by the client shall be borne by the client exclusively.

Domestic allegement matching service

Note: This service is only available for CBL clients.

Complementary to the pre-matching services offered as described above and where no pre-matching instruction has been sent to the market, CBL accepts allegements via its depository from domestic market counterparties. It will then use these allegement messages to search for the best matching client instruction.

If no matching client instruction is found, the allegement is reported to the client provided that its Clearstream Banking account number is present.

For details of CBL's domestic allegement service, see Pre-matching services for external settlement instructions.

Procedures for domestic counterparties

Allowed countervalue difference

CCASS-eligible instruments

A maximum difference in countervalue of USD 25 or currency equivalent is allowed for the matching and settlement of against payment transactions with domestic counterparties for all non–CMU-eligible instruments eligible in CBL’s link to the Hong Kong domestic market.

CMU instruments

A difference of less than HKD 1 only is allowed for the matching and settlement of against payment transactions with domestic counterparties for CMU instruments. In the case of a discrepancy, the CBL counterparty’s cash countervalue prevails.

Specific settlement rules/settlement restrictions

Against payment transactions with domestic counterparties in all eligible securities can be effected in HKD and CNY depending on the currency denomination of the securities.

RTGS instructions for CMU and CCASS instruments

Real-Time Gross Settlement (RTGS) instructions for CMU instruments are not required for domestic instruction because CMU settlement is real-time by default. 
Note: A domestic instruction flagged with "NRTG" will be rejected by CMU.

RTGS instructions for CCASS instruments must be flagged to indicate that they are to be processed in the mandatory and/or optional settlement processing, as follows:

a. To settle in real time, the client must specify ‘YRTG’. If ‘YRTG’ is not specified, the instruction will automatically settle during the intra-day batches.
If the client specifies YRTG, which is a matching criteria in the instruction, the counterparty must also match otherwise the transaction will be unmatched and ultimately fails on SD. 
If, on a domestic instruction, the client later wants to change the processing indicator, the original instruction must be cancelled and the client must re-instruct with the new processing indicator value. For internal and Bridge instructions, this value can be changed post-release without having to cancel and re-instruct.

Back-to-back processing

Note: This service is only available for CBL clients.

Back-to-back processing is available for transactions in all dematerialised Hong Kong equities eligible in this market. If both the client and the domestic counterparty meet their settlement obligations and fulfil the market's back-to-back requirements within the relevant deadlines, the linked receipt and the linked delivery will settle with same-day value. To benefit from this functionality, clients must ensure that their back-to-back instructions are formatted as follows, according to the connectivity medium used:

a. The reference (16x) must neither start nor end with a single slash "/’ nor must it contain two consecutive slashes "//".

Management of failed instructions

Clients are expected to send cancellation instructions for their domestic trades which are no longer valid. Pending instructions will be cancelled on the 14^th business days after SD/instruction date (whichever occurs later).

Non–CCASS-eligible equities and warrants

Note: This service is only available for CBL clients.

Securities that are not CCASS-eligible must be settled physically, whether free of or against payment, and will be immediately re-registered in Clearstream’s name.

Transfer of physical securities

Note: This service is only available for CBL clients.

Successful transfer of physical registered securities can only take place if the beneficial owner (name as it appears on the certificate) completes a Standard Form of Transfer (also known as a “Transfer Deed”).

For a copy of the Standard Form of Transfer, clients should contact their CBL Relationship Officer or their local broker.

For the Standard Form of Transfer to be considered valid, it must bear:

• The transfer deed stamp; and
• Stamps, from the buying and selling broker, confirming payment of ad valorem stamp duty.

Securities transfers that do not meet this requirement will be rejected by Clearstream Banking’s depository.

When completing the Standard Form of Transfer, clients must provide the name of the transferee in the mandatory “Transferee(s) names in English” section:

• For transfers into or out of the CBL depository's vault: Citi (Nominees) Limited;
• For transfer into or out of CCASS:HKSCC Nominees Limited.

Clients should send a completed original of the Standard Form of Transfer with the physical securities to CBL's depository in Hong Kong (see General information).

CCASS registration process

Note: This service is only available for CBL clients.

Settlement of cross-border instructions

Physical securities deposited with CCASS are credited immediately and can be registered within approximately ten business days. To avoid clients from facing the call-back of the credited securities if CCASS has rejected the certificate during the re-registration process, such positions will be blocked on client accounts until the registration is completed successfully.

Corporate Actions Events requiring re-registration of physical certificates

Upon receipt of a client instruction or following a Corporate Action where resulting shares are physical certificates, Clearstream initiates the re-registration request where the conversion / issuer agent and local custodian. This re-registration aims to dematerialise the certificate and make the shares available for trading at CCASS.

When made available for collection by the Hong Kong Registrar, the custodian arranges the collection of the physical share certificates and prepares the required transfer and authorisation documentation. The certificates are generally collected by the custodian on the next business day.

Following collection, the certificates are deposited into CCASS for registration and dematerialisation.

Where available, CCASS immediate Credit services are used, allowing shares to be credited and made available to clients while the registration process continues.

For Immediate credit cases, the registration remains subject to validation by CCASS for up to 10 business days.

Should the registration be rejected, the certificates will be returned. In that case, Clearstream will notify clients to immediately return the affected securities to their account and, if necessary, at Clearstream’s or Clearstream's depository’s sole discretion, a buy-in process will be initiated at the client’s expense. Should clients fail to return the securities within two business days of the notification, the buy-in procedure will be initiated without further delay. By instructing Clearstream, clients consent to this procedure, in deviation from Article 12.3 of the Clearstream Banking Luxembourg General Terms and Conditions and acknowledge that this may result in the execution of the buy-in earlier than the period set out in Article 12.3.

This process will result in the debit of cash collateral equal to 130% of the total value of the securities from the client’s account, as soon as required by the market. The cash collateral will be refunded once the securities have been returned. By instructing Clearstream, clients acknowledge and consent to these potential charges.

Clients will be held solely responsible for all associated costs and damages resulting from the rejection and any subsequent buy-in process. Clearstream cannot be held liable for any market losses or damages incurred.

If Immediate Credit is not available, the custodian will automatically arrange an Express Registration Service (1day), when offered by the registrar. In this specific case, the shares will be available for trading when the express registration is successfully completed (expected to be executed in 1–2 business days).

The fees associated with the express registration service vary by Registrar and will be charged to clients at actual cost. By instructing this conversion Clearstream, clients consent to these potential charges.

If the registrar confirms that the Express Registration Service is not available, the applicable CCASS registration process will be the standard one (10 days).

Out-of-pocket expenses

Out-of-pocket expenses will be charged to the client. These include, but are not limited to:

• A registration fee of HKD 2.5 per board lot or per scrip, whichever is higher;
• Transfer stamp duty of HKD 5.0, payable per transfer by the first deliverer of the registered securities;

Out of pocket expenses are subject to change.

Note: As it is standard market practice for this duty to be included in the settlement countervalue, CBL clients do not need to specifically advise the stamp duty in their settlement instruction. Any stamp duty obligations applicable to FOP transactions must be clarified and processed with the relevant counterparty in a communication separate from the original instruction.
It is the client’s responsibility to ensure compliance with applicable stamp duty requirements in regard to their Hong Kong equities transactions settled in the CBL system. CBL shall not be responsible for ensuring such compliance.