Shanghai-London Stock Connect Set to Be Key Proving Ground for Chinese Depository Receipts

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The Chinese securities regulator has released the draft version of new rules concerning the use of Chinese Depository Receipts (CDR) and Global Depository Receipts (GDR) via the Shanghai-London Stock Connective initiative.

On 31 August the China Securities Regulatory Commission (CSRC) released the “Shanghai Stock Exchange and London Stock Exchange Online Connect Depository Receipt Business Regulatory Provisions (Trial)” (上海证券交易所与伦敦证券交易所市场互联互通存托凭证业务监管规定(试行)).

According to information from CSRC foreign-listed companies will be able to use CDR’s as instruments for listing on the Shanghai Stock Exchange while Chinese A-share companies will be able to use GDR’s to list on the London Stock Exchange (LSE) via the Shanghai-London Connect initiative that regulators expect to go live before 2019.

CDR’s were first unveiled by Beijing earlier this year, as instruments that permit Chinese investors to obtain stakes in foreign-listed companies via domestic bourses.

Regulators hope that CDR’s will help foreign-listed Chinese tech giants to return home in order to benefit both the domestic tech sector and China’s A-share market.

The new regulatory provisions stipulate that Shanghai-London Connect CDR’s should satisfy the requirements of the “Depository Receipt Issuance and Transaction Administrative Measures (Trial)” (存托凭证发行与交易管理办法(试行)) concerning the public issuance of CDR’s with respect to submission documents, approval procedures, accounting arrangements and CDR volume ceilings.

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