China eases restrictionsState Street has established global custody services for Chinese A-shares, enabling overseas investors to buy Chinese securities for the first time. Following on from the agreements on China’s World Trade Organisation accession, the Chinese Securities Regulatory Commission (CSRC) stated that foreign companies would be able to deal in domestic A-shares.

The move builds on the momentum created last year, when the CSRC issued its first licence for a foreign-funded fund management joint venture to German insurance giant and Dresdner Bank owner Allianz. Such developments also give the country’s underdeveloped investment fund market the long-awaited and much-needed boost to become more competitive.

Separately, Euroclear has completed the review of China’s financial infrastructure undertaken on behalf of the Chinese Securities and Depository & Clearing Corporation in August 2002. The Brussels-based international settlement house made recommendations in four areas: clearing, settlement, depository roles and the use of a central securities register. Proposed changes include the implementation of a central counterparty that nets the securities and cash legs of a transaction, and the introduction of a single delivery-versus-payment to alleviate the risks and inefficiencies inherent in the current system of two disparate settlement organisations.

Virt-x central counterparty

Pan-European stock exchange virt-x, the London Clearing House (LCH) and SIS x-clear (the Swiss central counterparty) have launched what they claim is the first pan-European central counterparty (CCP). The structure, which supports two interlinked CCPs provided by LCH and x-clear, went live on May 5. By market close, 28,164 trades had been cleared for settlement on May 8. Settlement of virt-x trades is offered by the UK’s securities depository, CrestCo, Brussel’s-based Euroclear Bank and SIS.

The launch of the CCP facility has been contentious from the start. When virt-x was created by the amalgamation of the UK’s Tradepoint and the Swiss Stock Exchange, Tradepoint’s existing CCP facility (already operated by the LCH) was switched off until x-clear had had the opportunity to develop its own CCP functionality.

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