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Settlements Cycle


A shares: T+0 (securities), T+1 (cash)

B shares: T+3 *

Debt: T+0 (bond unit), T+1 (cash)

OTC: T+0/T+1 for A shares, T+3 for B shares

Money Market: N/A

* Shanghai B-shares, which settle in USD, continue to trade on US holidays but settlement is deferred until the next working day.

Over-the-Counter (OTC)

The shares of delisted companies shall be compulsorily moved to the over-the-counter (OTC) market for trading. A new local stock code will be issued for the delisted stock, however, all the issued shares of the listed companies will continue to be safe-kept in CSDCC after being delisted.

Daily price fluctuation limit is restricted to 5% above or below the closing price of the previous transfer day and first bidding price is based on the last closing price before delisting, with an upper limit at 5% and no bottom limit.

Trading hours: the OTC shares can normally be transferred every Monday, Wednesday and Friday (09:30 -11:30 and 13:00 -15:00). Furthermore, the OTC shares can be transferred five days a week from Monday to Friday (09:30 -11:30 and 13:00 -15:00), if the delisted company meets the following requirements:

1. fulfill the information disclosure requirement;

2. the net assets of the company traded are positive or they are making a profit;

3. CPA has no qualifications or comments in the company’s latest annual report.

Settlement Procedures

Settlement procedure for QFII

A shares are traded and settled in RMB. All A shares and exchange-traded instruments are settled on trade date (T) with cash settlement on T+1. The China Securities Depository and Clearing Corporation Ltd (CSDCC) acts as the central counter-party and guarantees securities and cash settlement. On T, the qualified foreign institutional investor (QFII) places an order with its designated local broker at the Shanghai Stock Exchange (SHSE) (each QFII can deal through only one broker in the SHSE).

The broker will check the availability of securities (or cash) with the custodian bank, and then execute the trade. In the case of a sale instruction, the trading system also checks whether securities are available in the account of the QFII at the depository to prevent overselling or short selling. At the end of the trade day, the CSDCC will transfer the securities from the seller’s to the buyer’s account according to trade data provided by the exchanges. Shares purchased are automatically registered in the name of the buyer.

At the end of the day, the CSDCC reconciles its positions with the stock exchange and sends the custodian bank a settlement confirmation notification around 18:00 on T. Once the confirmation is received from the CSDCC, the custodian bank will reconcile the details with broker’s execution report. If there is no discrepancy, the custodian bank will settle the trade and send the settlement confirmation to clients. Otherwise, the custodian bank will contact the broker and/or QFII/Global Custodian Bank with the difference, and the pre-agreed error rectification procedure will be activated. Clients will be informed of the difference in trade amounts between the broker execution report and the CSDCC amount. If no change on the settlement amount is agreed by QFII and its broker, the custodian bank will settle the trade as per CSDCC’s record received on T. The CSDCC will notify the expected net cash payment by the end T, payable on T+1.

A custodian with a net payable position must transfer funds to its Clearing Account with its domestic clearing bank by noon on T+1. The clearing bank will transfer funds from this account to the custodians Clearing Reserve Account with the CSDCC by 15:00 on T+1. The CSDCC will credit the custodian’s clearing accounts with net receivable positions before 15:00 on T+1. The custodian bank will send a cash settlement confirmation to clients on T+1.

Short selling is not allowed and same-day turnaround trades in the A-share market have been prohibited by the China Securities Regulatory Commission (CSRC) since December 1, 2001. However, same-day turnaround trades for bonds and warrants are allowed.

The following flow chart shows an overview of the A-share settlement cycle:

Cash settlement procedure for QFII

While securities are settled on a trade-by-trade basis at the QFII level, cash is settled on a net basis at custodian level. The QFII custodian bank must maintain one clearing account with one of the CSDCC’s designated cash clearing banks and one clearing reserve account with the CSDCC. Cash is netted at the custodian level with the CSDCC’s authorized clearing bank.

The sub-custodian opens a clearing account for each client with the Clearing Bank of CSDCC for the cash settlement. The sub-custodian is pre-notified by the CSDCC of cash settlement on T day, detailing their clearing reserve account’s net payables or receivables. Assuming that the account has a net receivable position with CSDCC at 09:30 on T+1, client’s ledger balances will be updated in the RMB cash account. CSDCC will then transfer funds from the CSDCC reserve account to the sub-custodians clearing account later in the day for their net receivable position. CSDCC will then update all its settlement records in its system at about 16:00 the same day.

The following flow charts show an overview of the A-share cash settlement process:

Settlement procedure for B shares

Shanghai B shares are traded, listed and settled in USD. All B shares are automatically registered under the name of the ultimate investor upon settlement by the China Securities Depository and Clearing Corp Ltd (CSDCC) Shanghai branch’s computer system. Registration in nominee names is allowed, however, street name holdings are not allowed.

B shares are settled on a T+3 (where T = trade date) settlement cycle and on a trade-by-trade basis. Turnaround transactions, for example buying on trade day (T), but selling on T+1 or T+2, are possible in Shanghai and are settled on a first in, first out basis. The settlement cycle is the same as for a normal trade (T+3). However, same-day turnaround trading was prohibited effective from December 1, 2001. Short selling is strictly prohibited in mainland China. In Shanghai, short selling is not technically possible as the exchange’s trading system checks stock balances upon order execution.

Shares from sellers are earmarked pending settlement. The China Securities Depository and Clearing Corp Ltd Shanghai branch acts as the settlement counter-party with settlement made between the delivering party and the CSDCC Shanghai branch and between the CSDCC Shanghai branch and the receiving party. The CSDCC Shanghai branch has opened a clearing account with Citibank New York. All clearing participants receive and deposit settlement funds through this account.


A buy or sell order from a foreign investor is communicated via an approved foreign broker to a domestic broker or a foreign broker with special trading seat for execution. The shares are traded through the Shanghai Stock Exchange electronic trading system. The CSDCC Shanghai branch provides daily settlement notifications electronically to custodians at the end of day to enable them to match trades with their clients.


The custodian and brokers match the transaction as stated in the CSDCC Shanghai branch’s daily settlement notifications with customers’ instructions. Any discrepancies will be advised to customers on the same day.


If the custodian bank does not receive the instruction by 10:00 on T+2, then it will be unable to provide settlement details to the CSDCC Shanghai branch for pre-matching, and the CSDCC Shanghai branch will then require the broker that initiated the transaction to settle the trade. The pre-matching report produced by the CSDCC Shanghai branch will be sent electronically to the custodian bank in the afternoon. Any problems in the pre-matching process will be advised to the clients by the custodian bank that day. Amended/canceled instructions from customers should reach the custodian bank before noon on T+2. Good funds must reach the custodian bank’s designated account by 10:00 on T+2 Shanghai time by telegraphic transfer. Alternatively, clients can also send an MT202 or MT210 ‘Notice to receive’ by 10:00 on T+2, Shanghai time, for value T+3 to the custodian bank.


Good funds must be ready in the CSDCC Shanghai branch’s cash account no later than noon (Shanghai time). Trades will be settled if instructions are matched and funds are in the account. The CSDCC Shanghai branch will update the stock and cash positions of the investors and a settlement confirmation will be forwarded to the participants on the same day. For a sale, funds will be made immediately available to the selling investor.

All settlement with the CSDCC Shanghai branch is on an ‘against payment’ basis. However, from the custodian bank’s perspective, settlement can also be ‘against free of payment’, in which case the cash will be settled between the buying and selling brokers through the CSDCC Shanghai branch.

While CSDCC Shanghai branch handles the local clearing and settlement under the principle of delivery-versus-payment (DVP), trades are not settled on a true DVP basis due to the time difference between Shanghai and New York. Payment is made by telegraphic transfer between the clearing participants.

Actual payment is made by telegraphic transfer between the clearing participants’ accounts in USD. However, as the actual USD paid by the CSDCC Shanghai branch’s clearing bank in ‘good funds’ in New York is some 12 or 13 hours behind Shanghai time, default by the CSDCC Shanghai branch will not be detected until early SD+1 Shanghai time.

The CSDCC Shanghai branch transfers stocks between accounts electronically in its records on settlement day pending receipt of funds with ‘good value’ from participants on the day following settlement day. DVP is therefore on clearing participant level with intra-day cash risk. The settlement period will be extended accordingly if it falls on a public holiday in either mainland China or New York. Normally, on a mainland Chinese public holiday, trading will be stopped with settlement postponed to the next working day. On a New York holiday, trading will not be affected but settlement will be postponed. For example, if a trade is carried out on Monday and there is a New York holiday on Tuesday, settlement will take place on Friday instead of Thursday.


Book-Entry: A and B shares are lodged with the CSDCC Shanghai and are registered automatically in the name of the beneficial owner on settlement. Street name is not allowed while nominee registration is permitted for B shares. Depository records form the registration record.

Physical: Not applicable

Bank for International Settlements Model (BIS):

Not applicable as China is currently not a member of the BIS.

Payment Systems

There are three types of bank-to-bank RMB fund transfers in China:

Cashiers orders

Cashiers orders are issued by local branches. Same day value is provided if presented before the cut off time of 15:00.

PBOC Clearing House for RMB local clearing

A credit advice is prepared by banks and collected by PBOC to effect fund transfers in their RMB clearing system. This paper-based payment mode is used to credit funds to another bank’s account holders. This system is only applicable to the banks within the same city.

PBOC collects the credit advice from banks in two batches. For HSBC first collection is at 10:00 and the second collection is at 16:00.

For VD value, the credit advice must reach PBOC before 11:30 on VD.

PBOC real time payment system

The PBOC launched a real time payment system, China National Advance Payment System on April 14, 2003 for bank-to-bank transfer of the electronic fund transfer.

Overdraft Permitted

Overdrafts are allowed for HKD and USD (for B shares). There are no restrictions on overdraft facilities for USD/HKD offered to foreign investors, however, the terms and conditions of the facility are negotiated between the local custodian and the investor.

Overdrafts in RMB (A share market) are prohibited.