Photo/Shetuwang

Oct. 17 (NBD) -- The Shanghai Stock Exchange (SSE), together with its clearing service provider China Securities Depository and Clearing Corporation Limited (CSDC), recently ran a 24-hour debugging test to examine functions of the Shanghai-London Stock Connect trading platform.

A total of 17 securities firms including CITIC Securities, UBS Securities, China Merchants Securities and China International Capital Corporation Limited participated in the test. Senior industry insiders expected that the first batch of market makers for the Shanghai-London Stock Connect program would be chosen from the 17 brokerages.

The Shanghai bourse last Friday issued a draft guideline on the cross-border conversion of depository receipts via the Shanghai-London link to solicit public opinions. The draft stipulates that any member intending to engage in the cross-border conversion of Chinese Depositary Receipts (CDRs) shall first register with the SSE as a Chinese cross-border conversion institution.

An anonymous source with a big listed brokerage said his or her company submitted the application for market maker qualification shortly after the release of the draft guideline. The Shanghai exchange will carry out field inspections at securities firms and then decide whether or not to open the trading system to a certain brokerage, based on the results of on-site inspections and the debugging tests as well as the preparatory work of the applicants, the source elaborated.

Concerning the selection criteria of investment targets under the Shanghai-London Stock Connect scheme, a senior professional with a Shanghai-based securities firm singled out companies with a comparatively stable price-to-book (PB) ratio in financial, energy, consumption and other traditional industries, considering the UK-listed companies with comparatively high valuation and sound fundamentals are more likely to issue CDRs at the initial stage of the Shanghai-London trading mechanism.

The long-awaited Shanghai-London Stock Connect is expected to kick off as early as December this year.

Email: gaohan@nbd.com.cn