CFCL Settlement - China

Settlement process 

Please refer to the Clearstream website for the complete information about the Settlement process. 

Settlement services 

Pre-matching service 

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

For transactions in CCASS-eligible equities, when the counterparty is a custodian bank (Clearstream, acting as a sub-custodian for CFCL), 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 Fund Centre nor Clearstream are 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 

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 account number is present.

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

Procedures for domestic counterparties 

This section describes the procedures for domestic counterparties of the Chinese market (CBL acting as sub-custodian for CFCL): 

Allowed countervalue difference 

Stock Connect 

A maximum difference in countervalue of CNY 10 only is allowed for matching and settlement of against payment transactions with domestic counterparties. In cases where the difference in the settlement amount does not exceed the stated tolerance limit set up by both parties, the amount specified by CBL will prevail.

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. 

Stock Connect 

Clients who want to invest in Stock Connect China securities must open an SPSA (Special Segregated Account) and obtain an Investor ID via CFCL (see “Stock Connect onboarding procedures” under Onboarding procedures). 

For free of payment transactions, non-trade or off-exchange transfers are generally not allowed, except for: 

• Permitted SBL activities; 
• Transfers between EPs and their clients for the purpose of rectifying error trades; 
• Post-trade allocation of shares to different funds/sub-funds by fund managers; and;
• Other situations specified by SSE and ChinaClear.

Cash settlement 

The standard SPSA is not a "True DVP" model as the cash proceeds will be confirmed either on T+0 after 21:25 HKT or on T+1 from 09:30 to 12:00 with good value to T. 

Cash settlement on T+0 is optional. The CCASS cash clearing banks of both counterparties must sign up for T+0 RMB cash settlement. 

“True DVP” Settlement model - A "True DVP" model is possible for clients who use any of the brokers (for example Citi Global Markets) who appoint Citibank as third party clearer or settlement agent. "True DVP" refers to receiving cash confirmation immediately upon settlement of the DVP transaction.

RDP Settlement model - Clients who opt for real-time delivery versus payment (RDP) money settlement must check with their designated brokers to ensure they support RDP settlement as the RTGS flag is a settlement matching criteria. Please see RTGS instructions for Stock Connect. The securities settlement will be effected only after a payment from receiving party to delivering party is confirmed. Clients who operate under the “True DVP” settlement need not flag their instructions for RDP settlement. 

Cash Funding and Settlement 

To avoid process delays that might lead to settlement failure, it is highly recommended that clients send settlement instructions by SD-1 16:00 HKT for pre-matching purposes.

Recycling Settlement 

Clients can opt for a recycling settlement within the next three business days following the original contracted settlement date by applying to China Central Depository & Clearing Co. (CCDC) or Shanghai Clearing House (SCH), should a trade fail to settle on schedule. CBL will advise clients of the CSD Reference upon notification. Clients should take note to adhere to the existing process for failed trade reporting: 

• Clients have to cancel their original instruction of the failed trade and re-instruct for settlement recycling with the new settlement date and amount, with no changes to other trade details; 
• Clients have to instruct CFCL by sending an CFC Web Portal, Swift MT599 free-format message (BIC: DBFCLULL) with the following details:  

• Attention: Settlement Singapore Team 
  Instruction Reference on the settlement recycling trade: 
  New CFETS Trade Reference number on the settlement recycling trade: 
  CSD Reference from the original failed trade: 
  Please take this request to apply for failed trade recycling. 

All the above-mentioned requirements must be submitted to CFCL by SD-1 16:00 HKT. 

RTGS instructions for Stock Connect instruments 

Real-Time Gross Settlement (RTGS) instructions for Stock Connect instruments must be flagged to indicate that they are to be processed for RDP settlement, as follows: 

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.

Management of failed instructions 

For all eligible securities, the depository will re-present all settlement instructions for transactions that do not settle on the first possible value date in the domestic market to the respective domestic counterparties on each of the three subsequent domestic business days. For transactions that remain unsettled, CFCL will automatically cancel the client’s instruction on SD+3. 

For unsettled deliveries, securities will be re-credited to clients’ accounts on SD+3. 

Out-of-pocket expenses

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

Stock Connect 

Depository Fees as applicable, CCASS portfolio fee ranging from 0.3 to 0.8 bps; and;

Market fees and levies applicable to Stock Connect (usually pass back by broker) - Handling Fee: 0.487 bps | Securities Management Fee: 0.2 bps | Transfer Fee: 0.4 bps | Stamp Duty: 5 bps of consideration of the seller. 

Note: As it is standard market practice for this duty to be included in the settlement countervalue, CFCL 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 Stock Connect transactions settled in the CFCL system. CFCL shall not be responsible for ensuring such compliance.