Elin Tan
As a global financial hub, Hong Kong bridges global markets and mainland China. However, China’s financial markets present economic, regulatory, and technological challenges, particularly amid evolving global trade dynamics, such as the recent US-China tariff developments.
- Simplified market access: TORA provides seamless access to China’s equity markets through Stock Connect, bypassing restrictive capital controls.
- Comprehensive platform: TORA integrates market data, execution, risk controls, and compliance into a single solution tailored to China's regulatory requirements.
- Operational resilience: TORA’s robust infrastructure ensures efficient cross-border trading, compliance, and scalability to handle market volatility.
While global trade relations continue to shift, sectors like electric vehicles present growth opportunities within China. Nevertheless, persistent economic uncertainties, regulatory changes, and external pressures make forecasting challenging. Strategic positioning and diversification are crucial for navigating this landscape.
Given this volatility, investors need to approach China’s markets with caution, carefully assessing both the risks and potential rewards.
Stock connect
For investment firms looking to access mainland China, Stock Connect - a joint initiative launched in 2014 between Hong Kong Exchange (HKEX) and the two main Chinese exchanges, SSE (Shanghai) and SZSE (Shenzhen) - offers a simple and accessible northbound route for foreign investors to access China’s equity markets without requiring an onshore account in mainland China. It also offers a southbound route for Chinese investment firms looking to access international markets.
For global firms, Stock Connect provides seamless access to a range of mainland China-listed stocks, while sidestepping some of the more restrictive capital controls traditionally associated with China’s markets. By connecting directly through Hong Kong, foreign investors can tap into China’s equity markets with fewer regulatory hurdles and less operational complexity than with the long-established quota-based QFII (Qualified Foreign Institutional Investor) and RQFII (Renminbi Qualified Foreign Institutional Investor) systems. Both of those require investors to obtain specific licenses and adhere to complex application processes, with capital tightly regulated. In contrast, Stock Connect operates on a daily trading quota basis, with trades conducted under the laws and regulations of Hong Kong.
Regulatory and operational challenges
Regardless of whether firms access mainland China through Stock Connect or the legacy QFII/RQFII avenues, there are several operational factors that they need to consider. This is where their O/EMS platform can play a vital role, in managing complex workflows, automating compliance with China’s trading rules, and efficiently routing orders across multiple venues. Given China’s unique market structure, the O/EMS needs to provide the requisite functionality to account for daily quotas, foreign ownership limits, specialised trading restrictions, and other market nuances. The O/EMS should also offer seamless connectivity and integration with both international and onshore brokers, while handling real-time data feeds specific to China.
Risk and compliance controls are equally critical. Firms need to be able to run pre-trade checks tailored to China’s regulatory environment, along with robust post-trade surveillance to monitor adherence to rules on ownership, capital mobility, and settlement cycles.
Operational resilience and scalability are also essential due to the potential volatility in China’s markets. This includes having reliable infrastructure for cross-border trading and scalable systems capable of processing large volumes of data with low latency. The ability to adapt quickly to regulatory policy changes and to provide detailed, compliant reporting is also a key requirement.
A one-stop solution
LSEG TORA integrates market data, execution capabilities, risk controls, and compliance management into a single solution. It simplifies trading through Stock Connect via connected brokers, ensuring efficiency and compliance with Chinese regulations.
A key strength of TORA’s O/EMS is its ability to address China-specific regulatory and functional requirements. The platform incorporates pre-trade compliance tailored to Chinese rules, covering areas like foreign ownership limits, day trading restrictions, and trader ID tracking. This ensures that trades comply with local regulations while maintaining efficiency.
In addition to these core features, TORA offers a range of advanced functionalities, such as eLocate, which connects to multiple borrowing pools, providing crucial support for Stock Borrowing and Lending—a significant advantage given the challenges of shorting in China. TORA also supports broker-neutral Pairs Trading, offering unparalleled flexibility in executing complex pairs strategies.
LSEG clients also benefit from Workspace, offering market data, insights, news and cutting-edge analytics. And for firms requiring additional front or middle office support in the region, TORA’s Outsourced Trading Services, with a dedicated execution desk and experienced trading team, provide valuable operational and strategic assistance.
Navigating uncertainty
In uncertain environments, accessing China’s markets through a robust, efficient, and compliant infrastructure is crucial.
TORA provides a reliable gateway, enabling firms to navigate risks and seize opportunities. As market dynamics evolve, LSEG supports adaptable trading strategies, positioning firms prudently amid challenges.
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