CSDC Successfully Completes the Third Entire Network Simulation Test for Cross-market ETF on SZSE

      In response to the innovation of the cross-market ETF products launched by the Shenzhen Stock Exchange (SZSE), the CSDCC, with the cooperation of the Shenzhen Stock Exchange (SZSE), has organized and completed the third entire network simulation test for the Jiashi Shanghai and Shenzhen 300ETF.
      The subscription and redemption of the cross-market ETF on the SZSE differs from a single-market ETF in the following aspects:
      (1) For single-market ETFs, an application for subscription or redemption is sent to the stock exchange via the floor trading system of a broker. For cross-market ETFs on the SZSE, an application for subscription or redemption is sent to the head office of the CSDCC via an off-board channel, and the CSDCC then checks the validity of related accounts open on the SSE or SZSE, instructs its Shanghai or Shenzhen Branch to freeze the related securities portfolio or unit funds, and then unfreezes and completes the registration change for the related securities portfolio or unit funds upon confirmation of the fund management institution.
      (2) The cross-market ETF subscription and redemption can be settled only in unsecured mode. An investor can subscribe for a corresponding proportion of ETFs only when the balance of its portfolio in the SSE or SZSE account is sufficient. Likewise, an investor can redeem the balance of its portfolio in the SSE or SZSE account only when the balance of its ETFs in the SSE account is sufficient. The settlement of funds involved in subscription and redemption is conducted on the collection and agency payment basis.
      Therefore, the key to successful cross-market ETF operation in the SZSE lies in the coordination of the stock and fund systems of the CSDCC in Beijing, Shanghai, and Shenzhen, respectively. In the first half of 2010, the CSDCC completed the development of business implementation schemes and the internal technological transformation of systems in the aforesaid three cities. The CSDCC and the SZSE had conducted two entire network simulation tests in September 2010 and January 2011 and organized two special training sessions in October 2010 and February 2012.
      Recently, the CSDCC and the SZSE jointly conducted the third entire network simulation test for cross-market ETFs on the SZSE. The third entire network simulation test covered all aspects of the cross-market ETF business on the SZSE, including subscription, application, redemption, offset, query, and collection and agency payment of funds. Starting on March 1 and ending on March 12, the simulation test spanned 8 working days. Through joint efforts of the CSDCC, the SZSE, Harvest Fund Management Co., Ltd., Shenzhen Securities Communication Co., Ltd., China Securities Index Co., Ltd., and 74 securities companies, the third entire network simulation test for cross-market ETF on the SZSE came to a successful end.
      This entire network simulation test enabled participants in the cross-market ETF business on the SZSE to perform business operations in a simulated environment and helped them familiarize themselves with and understand the related rules and operation processes for the cross-market ETF business on the SZSE. It also verified the rationality of the business processing of different participants of the business and the coordination between them and laid a sound foundation for the successful launch of cross-market ETF products on the SZSE.