China reforms securities settlement system to attract foreign capital

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The China Securities Regulatory Commission (CSRC) published draft rules that will bring institutional trading in line with Delivery Versus Payment (DVP), a global practice under which settlement of stocks and cash occurs simultaneously.

Currently in China’s equity market, stocks are settled on the day they are traded but cash settles the next day.

Global investors have long hoped that China can reform its settlement system. The differences create additional costs and risks for overseas investors and their brokers, ASIFMA, the financial industry body, has said.

CSRC said on Friday that the reform will have no impact on China’s retail investors. It is designed to improve safety in China’s securities settlement system, and further attract foreign money inflows.