To members of the inter-bank bond market:
In order to further facilitate overseas institutional investors’ investment in the inter-bank bond market, the National Inter-bank Funding Center(hereinafter as CFETS) will start the trial operation of the direct trading service for overseas investorsfrom 1st of September, 2020. The relevant matters are hereby notified as below:
I. Participants
According to the announcement of the People’s Bank of China No.3 [2016] and other provisions, overseas institutional investors who have bond accounts in the inter-bank market(hereinafter as direct investment mode) , qualified foreign investors and RMB qualified foreign investors (hereinafter jointly as overseas investors) are eligible for this service.
II Business Arrangement
i. Opening Process
Prior to trading, overseas institutional investors shall entrust settlement agent bank to submit commitment letter (see Appendix 1) and application form (see Appendix 2) requesting for direct trading service to CFETS.
ii Trade Varieties and Trade Mechanism
Overseas institutional investors solicit cash bond trading with domestic market makers by requesting for quotation(RFQ) with quantity but no price. Market makers quote and reply in CFETS system, while overseas investors may lift one quote and confirm the trade also in CFETS system.
Third-party platform may connectwith CFETS to provide order routing for overseas investors. CFETS reserve rights to change the configuration and protocol of direct trading service according to market conditions.
iii Applicable Bonds:government bonds;local government bonds;central bank bills;financial bonds; company credit bonds;negotiable certificate of deposit (NCD); asset-backed securities; standard notes and other varieties of bonds that can trade and circulate in the inter-bank bond market.
iv Basic Rules
The minimum amount of request for quotation for a single trading account is RMB 10,000, and the minimum variable unit is RMB10,000. Overseas investors can conduct trade allocations and list trading according to their needs.
The trading days and trading hours applicable to the inter-bank bond market, specifically is each trading day 9:00am to 12:00pm and 13:30pm to 16:30 pm (Beijing time).If there is any change, CFETS will give further notice.
v Settlement Arrangement
The clearing method is in full amount,the settlement method is delivery versus payment(DVP)，and the speed can be T+0,T+1,T+2 and T+3. After a transaction is concluded by anoverseas investor, the settlement agent can check and download the transaction information in real time through the trading system and interface, and then handle the settlement on behalf of the overseas investor.
vi Fee Arrangement
According to the Notice on the Issuance of Operating Rules for Foreign Institutions to Invest RMB in Inter-bank Bond Market No.251[2010] issued by CFETS, overseas institutional investors’ transaction fee shall be paid by a settlement agent to CFETS, and the market maker institution shall pay the transaction fee to CFETS in accordance with the Notice No.302 [2005] issued by CFETS.
CFETS determines the service fee of the third-party platform on the ground of the third- party’s charging requirements.When a market maker institution achieves a transaction with an overseas institutional investor which is connected through a third-party platform,the market maker institution shall pay the overseas third-party platform service fee to CFETS according to the relevant third-party platform rate table provided by CFETS.
III Other Arrangements
The management of market entry, custody, and cross-border capital flow shall follow the relevant arrangements for overseas institutions to invest in inter-bank bond market under the current direct investment mode.The participating institutions shall comply with the requirements of documents such as the business and technical rules issued by CFETS.
Business Consultation: Min LIU (021)38585453 Dan SUN (021)20693721
Market Entry: Zhe LI (021)3858 5377
This is hereby notified.
Appendix:
1. Compliance Commitment Statement for Investing in China Interbank Bond Market through CIBM Direct RFQ
2. CIBM Direct Onboarding Form
National Inter-bank Funding Center
18th of August, 2020