Stock Connect: Opening the Shanghai Stock Exchange to US Investors

For years, the only way for most US investors to trade Shanghai Stock Exchange (SSE) securities was through tightly controlled quota programs (principally, the Qualified Foreign Institutional Investor (QFII) and Renminbi Qualified Foreign Institutional Investor (RQFII) programs). That recently changed with the launch of the highly-anticipated Shanghai-Hong Kong Stock Connect program (Stock Connect) on November 17, 2014.1 Stock Connect creates a unique trading link between Hong Kong’s existing order routing and clearing infrastructure (open to all international investors via Hong Kong brokers and market participants) and the SSE. Instead of a quota (unavailable or impractical for many US retail funds and hedge funds), international investors now only need to have appropriate brokerage and custody relationships in Hong Kong to begin investing. In addition, trading costs should be appreciably lower than other existing options for trading in China.

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