Important Update: HKEX Enhancements to Stock Settlement Fee and Multi-Counter Eligible Securities Settlement Arrangements and Corresponding Changes by CSBHK

Dear Customer,

Important Update: HKEX Enhancements to Stock Settlement Fee and Multi-Counter Eligible Securities Settlement Arrangements and Corresponding Changes by CSBHK

Thank you for your continued support of CITIC Securities Brokerage (Hong Kong) Limited ("CSBHK"). We hereby inform you that the Hong Kong Exchanges and Clearing Limited ("HKEX") will introduce two enhancements in the first half of 2025: (1) Enhancements to the securities market stock settlement fee; and (2) Enhancement of Settlement Arrangement for Multi-counter Eligible Securities. In response to the HKEX’s enhanced arrangements, CSBHK will adjust the CCASS stock settlement fee and trading arrangements of Multi-counter Eligible Securities accordingly. Details of the HKEX's enhancements and CSBHK’s updated arrangements are as follows:

1.         Enhancements to the securities market stock settlement fee

On February 21, 2025, Hong Kong Exchanges and Clearing Limited announced enhancements to the securities market stock settlement fee structure that are aimed at boosting market efficiency and ensuring consistent fee application across all trade sizes.

Stock Settlement Fee is charged by the Hong Kong Securities Clearing Company Limited for services relating to novation, settlement guarantee, risk management, and netting. The existing stock settlement fee structure, which includes minimum and maximum fees, results in smaller trades being disproportionately more expensive than larger trades.

The enhanced stock settlement fee structure will be clear, consistent, and equitable for all trades sizes, supporting both retail and institutional investors in executing their trading strategies. The new fee structure will come into effect in June 2025 (effective date to be announced by HKEX), with specific adjustments as follows:

·        The restructured stock settlement fee will remove the minimum fee of HKD 2 and the maximum fee of HKD 100, adopting an ad valorem rate to 0.42 bps (0.0042%) for each trade.

·        The stock settlement fee for eligible market making trades for Exchange Traded Products (ETPs) will be set at a rate of 0.20 bps (0.0020%), removing the minimum and maximum fees.

For more details regarding the optimization of the securities market's stock settlement fee structure, please refer to the announcements from the HKEX.

1.1.   CSBHK client stock settlement fee adjustment

In light of the updated stock settlement fee announced by the HKEX, CSBHK will adjust the stock settlement fee accordingly. Following the implementation of the new fee structure, clients conducting Exchange trades will be responsible for paying the stock settlement fee (CCASS Stock Settlement Fee) in accordance with the HKEX's fee schedule, and we kindly ask for your attention to this important matter. For details regarding our Service fees, please refer to our official website on or after the effective date at www.citics.com.hk ("CSBHK Website"): 'Home > Customer Service > Service Charges.'

2.      Enhancement of Settlement Arrangement for Multi-counter Eligible Securities

Hong Kong Securities Clearing Company Limited ("HKSCC") is going to enhance the settlement arrangement for Multi-counter Eligible Securities in Central Clearing and Settlement System ("CCASS") by adopting a single tranche multiple counter arrangement (the "Enhancement"). The Enhancement will improve the scalability of trading of Multi-counter Eligible Securities such as Dual Counter Securities ("DCS") and Exchange Traded Products ("ETP").

Currently, HKEX supports the listing, trading, and settlement of securities traded in multiple counters in different currencies (e.g. HKD, RMB and USD).Although Multi-counter Eligible Securities are traded in counters in different currencies, they are securities of the same class, with the same rights and entitlements, and they are fully interchangeable between respective counters. Trades in a Multi-counter Eligible Security executed under the respective counters are cleared and settled in CCASS under different stock codes and hence Clearing Participants ("CPs") are required to perform manual inter-counter transfers in CCASS to enable settlement despite the fact that the respective counters are fully fungible.

In order to enhance the existing settlement arrangement, HKSCC is going to introduce the Enhancement with the benefits of eliminating the need for the manual inter-counter transfer of Multi-counter Eligible Securities in CCASS. The scope of the Enhancement will cover all Multi-counter Eligible Securities in CCASS. All Multi-counter Eligible Securities, e.g. DCS and multi-counter ETP, will be cleared and settled under this Enhancement.

For the Enhancement, multiple trading currency counters will still be available on the trading front per stock as per existing trading arrangement. However, trades of different currency counters will only be reflected under one currency counter which will be designated as the domain settlement counter 1. In other words, market contracts for the multiple trading counters of the same Multi-counter Eligible Security will only be reflected under the domain settlement counter for subsequent post-trade processing.

The Enhancement will come into effect in the first half of 2025 tentatively, subject to regulatory approval. For more information regarding the enhancement, please refer to the announcements from the HKEX.

1 Domain settlement counter: means the HKD counter and reflects the stock code of the HKD counter, or another currency counter of a Multi-counter Eligible Security which is from time to time designated by HKSCC to reflect the aggregated holdings of such Multi-counter Eligible Security.

2.1.   CSBHK Multi-counter Eligible Securities trading arrangements

·        Counter conversion arrangement on the effective date: CSBHK will automatically carry out conversion of shareholdings in all Multi-counter Eligible Securities on the effective date. If clients hold securities in other currency counters (e.g. 80388), these will be converted to domain settlement counters (e.g. 388).

·        Trading Arrangements: There will be no change in the existing trading arrangement. Separate trading counters with different stock codes will still be made available to Multi-counter Eligible Securities for trading. Clients trading Multi-counter Eligible Securities through CSBHK will maintain consistency with existing trading arrangements. For trading of stocks in the same currency and the same counter, you can simply follow the existing buy/sell process with the respective stock codes. However, if you would like to place an inter-counter order (meaning buying in one counter and selling in another counter), you should be aware that the stock code for other counter is required to be input by yourself. For instance, if you bought shares in HKD counter with stock code “388”, and you wish to sell them in the RMB counter, then you will need to input the stock code “80388” when placing orders and vice versa.

·          Settlement Arrangements: After the enhancement takes effect, all trades of a Multi-counter Eligible Security will then be reflected under the domain settlement counter designated by HKSCC for clearing and settlement purposes. There will only be one stock code/ISIN for post trade activities in CCASS. Therefore, in CSBHK’s trading systems, all holdings of multi-counter securities will be displayed under the domain settlement counter. For example, if a client bought "80388”, the holding will be shown as "388".

·       Money Settlements: There will be no offset among money positions of different currency counters. Money positions will be maintained and settled separately, so clients are required to prepare money settlement by currency.

·              The counter conversion instructions will be cancelled.

·          For more information regarding frequently asked questions about Multi-counter Eligible Securities trading arrangements, please refer to CSBHK website: “Home > Customer Service > FAQs > Multi-Counter Eligible Securities Trading Arrangements.”

If you have any inquiries regarding the above updates, please feel free to contact your account manager or call our customer service hotline at (852) 2237 9338 / 400 818 0338, available from Monday to Friday, 9:00 AM to 6:00 PM, or email us at [email protected].

Yours Faithfully,

CITIC Securities Brokerage (HK) Limited