BNP Paribas has announced the launch of a broker-custodian offering to help investors and asset managers access the Shanghai-Hong Kong Stock Connect.
The scheme was originally expected to go live in mid-October, but the start date has been delayed and it will begin in late October or November.
The product was introduced by the firm’s custody business, BNP Paribas Securities Services and brokerage business BNP Paribas Securities, to help clients in Hong Kong invest northbound in Mainland markets. It will cover the trade lifecycle from pre-trade checks and execution to clearing and settlement.
“One of the hurdles for investors and brokers in northbound trading of this programme is a pre-trade check requirement before placing selling orders,” said Carrie Cheung, managing director, head of electronic trading, Asia-Pacific at BNP Paribas. “Investors are required to transfer their stocks from their custodians to their brokers one day before or on the morning of the day when the sell trade is executed.”
The pre-trade checking rules are a challenge for trading participants. Cheung said that the pre-trade stock movement creates counterparty risk, as it is done free of payment, operational burdens, together with risking trade information disclosure.
However, if the investor’s assets stay in custody with BNP Paribas Securities Services, there is no need to further deliver securities before selling via BNP Paribas Securities (Asia), since the former is also acting as the clearing agent of the latter.