SHANGHAI (Reuters) – China’s securities regulator said on Friday it will launch a reform this month to bring its securities settlement system more in line with international practices to attract foreign capital.
The China Securities Regulatory Commission (CSRC) published in January a draft framework for securities settlement which incorporates the principle of delivery against payment (DVP). This globally applied process involves the simultaneous delivery of all documents necessary for a title transfer in exchange for receipt of the stipulated amount.
Currently, in the Chinese market, stock transfers are effective the same day, while cash settlements must wait until the following day.
The CSRC said on Friday it would launch the reform of the system on December 26.
The reform will maintain existing practices, but introduce a tagging system to correlate delivery and payment for securities, and make it clear how to deal with breaches of contract, the Commission said.
It will have no impact on investments and transactions, but will make the settlement system safer and “more attract foreign capital to the Chinese market”, added the CSRC.
Global investors have long awaited reform of China’s settlement system. The current disparities pose additional costs and risks for foreign investors and their brokers, said the Asian Securities Industry and Markets Association (ASIFMA), a regional financial industry body.
(Shanghai office; French version Augustin Turpin, editing by Kate Entringer)
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