The Cross Border ETF Model Is Basically Established In Line With International Consensus.

China's mainland stock market launches cross-border market connecting overseas markets

Product model and international consensus

According to the sources of the exchange, the specific plan of the Hong Kong stock ETF has been reported to the SFC and approved once it can be implemented.

The scheme is basically consistent with the international cross border ETF products, and there is no essential difference.

This will also lay a foundation for the further development of cross-border ETF products in Europe and the United States in the future.

According to the insiders, the parties had previously envisaged the practice and experience of the single market ETF adopted by the Shanghai and Shenzhen Stock Exchange, but it was very difficult and had conflicts with the overall institutional framework and technology system of the mainland exchanges.

For example, the mainland exchanges use front-end control. According to the paction instructions of customers, the exchange technology system will check whether there are stock or funds in the customer accounts, otherwise, it will not be able to conclude the paction.

This is feasible in the single market ETF products listed on the Shanghai and Shenzhen Stock Exchange, because stocks, ETF and investors are in the same market.

In the same way, in the single market ETF products, the purchase and redemption can achieve real-time exchange of shares and ETF shares, and there will be no risk of liquidation.

But for cross-border ETF, stock exchanges are not in real time.

Therefore, the adoption of a single market ETF mechanism on cross-border ETF products is technically difficult.

The product mode must be changed so that it can be achieved in both the existing system and the technological environment, and it can also meet and fulfill the inherent requirements and functions of the product.

The current scheme basically adopts the QDII framework, issuing QDII to raise funds and carrying out stock trading with ETF in overseas markets.

The exchange is not responsible for front-end control.

Due to the differences in paction time, cross border ETF can not carry out real-time stock and fund exchanges, and purchase and redemption are conducted on the sidelines, similar to the open ones.

Improving trading mechanism and promoting international pricing power

It is understood that at present, the Shanghai and Shenzhen Stock Exchange intends to launch the Hong Kong stock ETF products have been basically determined, the Shanghai Stock Exchange will launch ETF products to hang seng index of state-owned enterprises, Shenzhen Stock Exchange's Hong Kong stock ETF will be the Hang Seng Index as the target.

The launch of Hong Kong stock ETF is an important step towards internationalization of the mainland stock market. Its significance lies in pushing the mainland stock market and the mainland investors to a gateway to the international market.

In recent years, mainland enterprises, especially large state-owned enterprises, have become the main listed resources in the Hongkong market, covering most of the market value of the Hongkong market, which are quite similar to the investment targets in the mainland stock market.

Therefore, the introduction of Hong Kong stock ETF can not allow mainland investors to participate effectively in global investment, share the fruits of the world economy and diversify investment risks globally.

The product that can really achieve this goal is targeted at cross-border ETF in major international securities markets such as Europe and America.

In this regard, authorities told the China Securities Journal reporter that all of this is in the process of planning, and the important thing is that the Hong Kong stock ETF has paved the way for the future cross-border ETF linking the European and American markets.

It is understood that as early as a few years ago, the mainland stock exchanges and related fund companies have begun to plan cross border ETF products in all directions.

In addition to the Hong Kong stock ETF, the design products also include the standard ETF 500, the Nasdaq 100 index, the Dow Jones index, the Tokyo core 30 index, and so on. It is a cross-border index that tracks all the major international indexes. It covers almost all major economies and markets around the world.

Authorities say that the obstacles to the introduction of these cross-border ETF are mainly policy and technical barriers.

Technically, there is no essential difference between the cross border ETF and the Hong Kong stock ETF. The biggest difference is jet lag.

When cross-border ETF is being traded on the Chinese market, the European and American markets may be closed, and the corresponding stock spot does not trade, which is a test for the price discovery ability of Chinese market and investors.

If the price discovery capability, information acquisition and analysis and research capabilities are strong enough, pactions are sufficiently active and market liquidity is abundant enough, the Chinese market will become one of the pricing centers in the global market, for example, in the European and American markets, China's cross-border ETF will find prices for them.

Just as the US market now has strong pricing power, it affects the global market, including asset prices in Hongkong and the mainland market.

The authority stressed that Shanghai must have such an international financial center.

From the perspective of asset allocation and risk management, domestic investors, especially institutional investors, are bound to have potential demand for cross-border ETF.

However, a problem in China is that although the variety and quantity of ETF are developing rapidly, the penetration rate among investors is not high enough.

According to statistics, the ETF participation rate of domestic investors is only 1% now, and the ETF paction volume accounts for only 1% to 2% of the total market volume.

In the US market, this ratio reaches 30% to 40%. The main reason for the large difference in trading volume is that the ETF trading mechanism in the domestic market is not perfect at present, especially the lack of short selling mechanism, so that the characteristics of ETF as a trading tool can not be fully exerted effectively.

In this regard, authoritative sources said that the domestic exchanges are actively taking measures to improve the convenience of ETF pactions, especially by introducing ETF into the margin target, and introducing the short selling mechanism to raise ETF's attraction to investors and improve its liquidity.

It is believed that through these measures, the future cross-border ETF will become an effective tool for Chinese investors to invest and manage risks globally, and will be welcomed by investors.